They say that money makes the world go round. But how does it work, and how has it changed over time? While developing the ECO Coin, we’ve been thinking a great deal of money, past and present. From the origins of civilization up to present day, economy has gone through countless shakeups, and yet we tend to take our current way of thinking about money for granted. Welcome to the fifth part of The Story of Money: Plastic.
The era of plastic money is also the era of credit. Like paper money, the idea of a credit card begins with a promise. In this case, the promise is not “we owe you”, but “we trust you to pay us back, even if you have no real money to pay with right now”. The idea of credit cards originated with individual businesses offering it to loyal customers. Think of a regular at the local bar who maintains a tab so that he can always get a drink, even when he has no cash on hand.
The first credit cards were not plastic – nor were they even cards. Businesses began by handing out coins or metal plates as symbols of credits. Eventually it was found more practical to start handing out paper cards. But as time went on, busy customers who frequented a large selection of shops found themselves carrying around an inordinate amount of these cards.
One of the first companies to try to solve this inconvenience, in 1950, was the Diners Club. This service allowed diners at a selection of New York restaurants to pay by credit, on the condition that the debt was paid off at the end of each month. Eight years later, the Bank of America took the next step: a credit card that did not require the consumer to pay at the end of each month. This was the enterprise that eventually became Visa.
The idea of credit was shifting from a privileged trust relationship between individuals, to a more abstract category. Now, people could essentially pull money out of thin air, but careless spenders were and are still often saddled with considerable debt. Almost everyone now carries a little plastic card that represents an indefinite amount of money – but the situation is precarious. Where does money go next?
Next week: Bits
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