The history of credit took a big turn with a new development: growing automobile sales.

Autos were necessary but expensive to buy as a single purchase. Everyone needed the auto, and everyone was forced to buy cars with credit. Installment buying for automobiles gave respectability to buying on credit.

The other significance of automobiles on credit was that they allowed people to go long distances in a short time, to places where they were total strangers. And what if the car broke down? That was common with the early autos. Drivers could wind up far from home, in need of costly repairs, and without enough cash to pay for them.

To solve that problem, oil companies came out with their own type of credit card. This credit card could be used to buy oil, gas, and mechanical service. Unlike the department store charge card or house card, the oil company credit card could be used everywhere around the country.

Thus, by the 1920s the essentials of the modern credit card were at hand: • Oil companies showed the charge cards could be used nationwide • Automobile buying needs showed buying on time was respectable • Americans had felt comfortable with credit for centuries.

It took another thirty years before the credit card as we know it was invented. Three men finally accomplished this over lunch in a New York City restaurant in 1949.

They were convinced that there was money to be made in consumer credit, and tried to find a way to tap it. The charge card or house card boosted sales and customer loyalty, but without interest, the charge accounts by themselves did not generate revenue. Installment sales did produce interest, but that was meant to cover the seller’s costs, and not to earn income.

Suppose, the three wondered, that a third party inserted itself between buyers and sellers. Suppose this third party promised the sellers many customers, those who would not have gone to them otherwise. Suppose the same party offered affluent people with good credit records a diverse choice of establishments (not just one department store or a chain of gas stations) where they could charge what they bought, no questions asked. Wouldn’t these well-heeled spenders be more inclined to patronize those establishments where they had credit? Wouldn’t business owners, seeing their sales increase and their profits soar, be willing to return a small percentage to the third party that helped provide them with the new customer base? Wouldn’t those small percentages add up to a small fortune?

They sounded out the restaurant owner, asking how much credit card business that went his way would be worth. The owner replied, “Seven percent.” And, Diners Club was in business.

The early Diners Club credit card looked like miniature books. The owner’s name was on the front of the credit card booklet; inside were the names of establishments that had agreed to accept the credit card. Owners didn’t pay any interest or annual fees, but they paid off their entire credit card bill every month.

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