The UK credit card industry will be celebrating its 40th birthday this week, four decades after Barclaycard was launched from a converted shoe warehouse in Northampton.
While American Express and Diners Club had already been operating in the US since the 1950s, the idea was entirely new to the UK, and not always entirely welcome.
“We got loads of letters back saying ‘what the hell are you doing, we shall never use these’,” John Healey, one of Barclaycards first employees back in 1967, told the BBC.
Others were more receptive however, and the card proved a success, although users were required to settle their balance in full at the end of every month.
It was not until 1970 that the laws were liberalised to allow cards to offer extended credit and not until 1972 that Barclaycard received some competition in the form of the Access card.
Now the market has grown to more than 1,300 cards but despite significant numbers of new cards since the early 1990s, profit margins have changed little since 1993.
This is due to card users’ reluctance to compare credit cards to find the best deal, leaving providers with little incentive to operate competitively, say analysts.
“Banks are extremely good at identifying the consumers who don’t tend to change banks or credit cards very frequently – most consumers don’t,” said banking expert professor Shelagh Heffernan.
“So charges paid by customers who don’t repay in full each month are giving these banks a very large margin.”
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