#TIL #CreditCards #HistoryOfCreditCards #EarlyCreditCards #CreditCardDrops
π The History of Credit Cards: How Early Credit Cards Were Launched in “Drops”
Did you know that early credit cards were launched in “drops”, a technique wherein banks would mail unsolicited cards to tens of thousands of customers at once? This little-known fact about the history of credit cards sheds light on the evolution of the credit card industry and how it has shaped the way we use credit cards today.
In this article, we’ll delve into the fascinating history of early credit cards and how they were distributed through “drops”. From the inception of credit cards to the eventual illegalization of drops in 1970, this piece will provide you with a comprehensive understanding of this pivotal aspect of the credit card industry’s evolution. So, let’s dive in and explore the journey of early credit cards and the innovative techniques used to popularize them.
## The Inception of Credit Cards
The concept of credit cards as we know them today dates back to the early to mid-20th century when various banking institutions began experimenting with the idea of offering customers a convenient line of credit that could be used for purchases. However, the widespread adoption of credit cards didn’t occur until the introduction of the “drop” distribution method.
### What are Credit Card Drops?
Credit card drops involved banks mailing unsolicited credit cards to thousands of customers at once, without the customers’ prior request or consent. The goal was to flood the market with credit cards and then leverage the customer base to encourage local stores to accept the cards as a form of payment.
#### How Were Drops Executed?
1. Banks would identify potential customers based on various criteria such as income level, creditworthiness, and previous banking history.
2. Once the target demographic was identified, banks would mail out large batches of credit cards to these customers without solicitation.
3. The customers who received the unsolicited credit cards were often enticed to use them through promotional offers and incentives.
## The Rise of Credit Card Drops
The “drop” distribution method quickly gained traction in the credit card industry and revolutionized the way credit cards were introduced to the market. With millions of credit cards being mailed out in drops, the consumer base for credit cards expanded rapidly.
### The Impact on Local Stores
Local businesses were incentivized to accept these unsolicited credit cards as banks promised them an influx of customers with purchasing power. As a result, the number of stores accepting credit cards grew, further fueling the popularity of credit cards among consumers.
#### Consumer Response to Credit Card Drops
1. Many consumers embraced the convenience and purchasing power that credit cards offered, leading to widespread usage.
2. The unsolicited nature of credit card drops led to an increase in credit card usage among individuals who may not have applied for a card otherwise.
3. This unprecedented distribution method sparked a cultural shift in the way people viewed and used credit cards.
## The Illegalization of Credit Card Drops
Despite their initial success, credit card drops eventually faced scrutiny for their aggressive and unsolicited nature. In 1970, drops were made illegal as regulators and consumer advocates raised concerns about the potential for abuse and fraud.
### The Shift in Credit Card Marketing
Following the illegalization of drops, banks and credit card companies had to pivot their marketing strategies and focus on acquiring customers through opt-in processes and targeted advertising.
#### The Legacy of Credit Card Drops
While drops are no longer a part of the credit card industry, their impact on the widespread adoption and acceptance of credit cards cannot be understated. The technique played a pivotal role in shaping the credit card landscape and paved the way for the modern credit card industry as we know it today.
In conclusion, the history of credit cards and the early distribution method of drops offer valuable insights into the evolution of consumer finance and marketing practices. By understanding the origins of credit cards and the methods used to popularize them, we gain a deeper appreciation for the role that credit cards play in our daily lives. The legacy of credit card drops continues to influence the financial industry and serves as a pivotal chapter in the ongoing story of credit cards.
There’s a long history of consumers having multiple credit lines with individual merchants. Bank of America conducted the first major drop throughout Fresno in 1958. This drop “succeeded where others failed by breaking the chicken-and-egg cycle in which consumers did not want to use a card that few merchants would accept and merchants did not want to accept a card that few consumers used.” Many merchants were very happy to no longer deal with managing credit accounts themselves.
Joseph Williams, the executive who engineered the drop for BofA, had no experience in the lending division and expected a 4% default rate on the cards. It ended up being 22% and he left the banking industry within months. The product (BankAmericard) survived and was eventually spun off as Visa.
Drops were made illegal in 1970 due to rampant fraud and the exploitative nature of lending credit to those who did not apply for it. Betty Furness of the Johnson administration called the practice “giving sugar to diabetics.”
[link to wiki on credit card history](https://en.wikipedia.org/wiki/Credit_card#History)
Like AOL CDs, but usury. Nice.
That just sounds so wrong in so many levels. Especially factoring in that the executive who engineered it was inexperienced in lending.
They may have made drops illegal but they were still allowed to market directly to college-age teens up until I guess a decade or so ago. In the 90s, the same month I was accepted to college I was (somehow!) contacted by phone by Capital One who wanted to give me a card.
My dad told me βguysβ used to give him and his buddies cash for breaking into apartment mailboxes and stealing all of those credit cards back in the day lol
I remember getting those.
Those lasted wayyy beyond the late 70βs. Iβd say into the early 90s if memory serves.
Banks still do drops. My wife and I receive several unsolicited cards every year.
The best financial advice I can give a young person is to never get a credit card. There are other ways to build credit and unless you have a very high level of discipline you shouldn’t be getting yourself into debt at such a young age. If you can’t buy it with cash you can’t afford it. End of story.
Hold up, how was this legal?! No contract was signed!
This seems like I mail you 5K in cash with a note in the package that its a surprise loan!
Acquired’ visa episode was just about this very subject.
In college in the early 80’s once you became an upperclassmen you started receiving all types of credit cards. Not applications, actual credit cards that could be used immediately. Gas cards, Mastercards, department store cards and all with pre-approval. Some of my friends bought all kinds of things they couldn’t afford. Crazy times.
Actually sounds way less predatory than the student loan process we have today.
Hard to imagine the days when there was no way to confirm if a card was good or if there was enough money in the account. Sure there was a number you could call in but it’s not practical to do that for every single transaction.
Then again I would not be surprised if the banks were better about guaranteeing transactions… whereas now they give a big middle finger to vendors.
I guess the first hit is always free.
In the 60’s I was mailed two (Do you remember mail?) two CC’s from different Banks in California. (WFB,BofA) Went right out and bought stereo equipment for my hippy pad in the Haight. Never paid em off never saw a bill after a while. I think they had like a $200 credit allowance each. Today I average a 795 credit score.
I’m not positive anymore, but I think I may have gotten my first credit card this way in 1969.
I recall this
Pre-authorized credit cards were fucking uncalled for, don’t know how anyone thought that shit was ok.
When it comes to credit cards and banks It’s a case of scam or be scammed. I’ve heard many stories from people who were issued these credit cards and never paid them off and after a few years they would receive the same credit cards and they did it all over again.
We credit card system really needs to be overhauled.
Banks are just loan sharks in pinstripes.
I remember in 1990s my dad will receive credit cards made, in their name, in the mail. Itβs not valid until you sign up. But still it must had given them the feeling of what it feels like to hold a credit card in their name.
So you listen to the Acquired VISA episode?