A Good One On Bank of America... (You Needed a Smile)

By
Mortgage and Lending with SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) NMLS 223495

Bloomberg: MasterCard hits 52 week high; Mike in Tucson, AZ mortgage lender

~ MasterCard Stock Hits 52 Week High August 3, 2011 ~

Okay.  You need a smile, and I'm here to help out.  Credit on demand was the stock market winner today, keeping the market from having its longest losing streak since 1978.

Do you know how Credit Cards came to be?  I have a Bank of America story for you...

The year was 1958.  Bank of America wanted to get into the credit card business.

Diners Club, the very first credit card, was established in NYC in 1950 by a man named Frank McNamara.  It was accepted at its outset by just 14 restaurants in New York, but within two years, companies had begun to realize the power of credit on demand, and Diners Club had grown dramatically in usage.  Some 400 restaurants and about 200 car rental agencies now accepted payment by credit card. 

McNamara believed that credit cards were a fad that would fade over time, and when he was offered $200,000 for his share of the business, he sold out.  (His heirs would like to turn him over in his grave.)

But I digress.  A man named Joe Williams was a Bank of America employee in California in 1958, and Joe had an idea.  Bank of America would corner the west coast market for credit cards by giving one, unsolicited, to every person in in the fine town of Fresno, California. 

Bank of America mailed out 60,000 credit cards.  (This was before people had credit scores.)  The fine print on the credit cards, each of which had a credit limit of $300, made the cardholder liable for all charges to the card, including fraudulent charges.  The bank couldn't lose.

If big is good, bigger must be better, yes?  Within 18 months, Joe Williams and his bosses expanded the credit card "drop" program dramatically, and 2,000,000 cards were sent, unsolicited, to citizens of California. 

Unfortunately for BofA, 20% of the cards immediately went delinquent.  "Hey," people thought, "free money!"  The bank was ill prepared to deal with delinquency on accounts where nothing could be repossessed.  They were even less prepared to deal with credit card fraud.

Bank of America lost nearly nine million dollars on its credit card launch, and Joe Williams was looking for employment elsewhere.  (See?  I told you I would make you smile!)

Bank of America recovered, but don't you wonder whatever happened to the BankAmericard?  Bank of America changed the name to VISA in 1976.

Today, we Americans have more than six hundred million credit cards in our pockets, wallets and purses.  Credit on demand wasn't a fad, and a card is swiped somewhere in the world ten thousand times each and every second!

I just thought you might like to know...  :)

_____________________

I'm Mike in Tucson, your preferred Tucson Arizona Mortgage Lender

NMLS #223495

SUNSTREET MORTGAGE LLC ~ Correspondent Mortgage Bank
Offices in Mesa, Tucson, Sierra Vista & Nogales

 

Comments (31)

Mike Jones
SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) - Tucson, AZ
Mike Jones NMLS 223495

Lenn,

LOL

Mike in Tucson

Aug 04, 2011 03:30 AM
Larry Brewer - Benchmark Realty llc
Benchmark Realty LLc - Nashville, TN

Mike - nice story, and I am not surprised that Bank of America found a way to lose money on a great idea. Thomas Jefferson was probably laughing in his grave.

Aug 04, 2011 08:57 AM
Chuck Carstensen
RE/MAX Results - Elk River, MN
Minnesota/Wisconsin Real Estate Expert

That did make me smile!  They were aggressive just sending out $300 of FREE money.

Aug 10, 2011 06:36 AM
Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

Wonder how the 20% deliquency rate on the credit cards compares to mortgate deliquency for BoA (including Countrywide).

Aug 10, 2011 06:57 AM
Eileen Hsu
Douglas Elliman Real Estate - Manhattan, NY
LICENSED REAL ESTATE SALESPERSON

That is a very interesting story about the history and birth of the credit card.  I'm sure the initial loss they more than made up for over the years. 

Aug 10, 2011 07:18 AM
Jim Poole
Tampa, FL
Zero Down, USDA Purchase Loans, FHA 203(K) Rehab & VA Streamline Loans

Great history lesson for all of us in the financial sector and yes it did make me smile. Thanks!

Aug 10, 2011 08:16 AM
Lisa Von Domek
Lisa Von Domek Team - Dallas, TX
....Experience Isn't Expensive.... It's Priceless!

Hello Mike,

Nice history lesson...gee, Bank of America lost money then and the continue to - unfortunately, it's the taxpayers money!

Aug 10, 2011 08:20 AM
Barb Merrill
Cactus Mountain Properties, LLC - Tempe, AZ
GRI, Associate Broker

Very informative!  To think the credit card has evovled in my lifetime!  Incredible!

Aug 10, 2011 09:12 AM
Ann Nguyen
eXp Realty of California, Inc. - Truckee, CA
Lake Tahoe Truckee Homes For Sale

I never had a Diners Club card but Visa and American Express have been my card of choice. Thank you for your interesting blog about credit card history :-)

Aug 10, 2011 10:00 AM
Dave Halpern
Keller Williams Realty Louisville East (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert

In 50 years they'll be writing about how BOA managed their short sales. I wonder what history will say.

Aug 10, 2011 10:32 AM
Gabriel Leyba
Leyba Real Estate LLC - Santa Fe, NM

That's hilarious!  I forgot that I used to get credit cards in the mail all the time even 8 - 10 years ago!  Wow how things have changed!

Aug 10, 2011 11:41 AM
Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

Do you mean to tell me that only a mere 53 years ago people paid for what they purchased with CASH and relied on their means to obtain things?  And civilizations grew AND prospered without credit cards?!?  Amazing! 

Aug 10, 2011 01:52 PM
Donald Reich
Prudential Centennial - New Rochelle, NY

Why am I not surprised by the 20% delinquency rate? Same old problems in this country!

 

Aug 10, 2011 03:46 PM
Sarasota & Manatee Counties FL
SaraMana Properties - QuickFreeMLS.com - Bradenton, FL
QuickFreeMLS.com - Listings In Paradise

That was a very interesting story! Thank you for sharing it!

Aug 10, 2011 06:07 PM
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

Mike - I have a vague recollection of BankAmericard, but didn't realize it was a precursor to Visa.  Thanks for the history lesson and the smile.

Aug 10, 2011 07:12 PM
Sandy Acevedo
951-290-8588 - Chino Hills, CA
RE/MAX Masters, Inland Empire Homes for Sale

Interesting story about the history. Although I was but a mere toddling child, I remember the Diners Club card and the Bankamericard. Love the reminder.

Aug 10, 2011 07:46 PM
Mike Jones
SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) - Tucson, AZ
Mike Jones NMLS 223495

Sandy,

Oh, come on!  You weren't even born yet.  LOL!

Christine,

You're most welcome; thanks for stopping by.

John,

You're welcome!

Don,

Their stock sure took a beating in the last several days, didn't it?!

Carla,

I tried to pay cash for gas yesterday at Costco, and they wouldn't take it!

Gabe,

Ain't it the truth!

Erica,

I sure miss Paul Harvey!

Dave,

I bet it won't be good.

Ann,

You're welcome! Thanks for stopping by to comment.

Barb,

I thought the same thing!

Lisa,

Use the only weapon you have: VOTE!

Jim,

Thanks for mentioning the smile!

Eileen,

No doubt!

Cindy,

Have you noticed what's happened to B of A's stock price since last Friday?!

Chuck,

Yes they were!

Larry,

Thomas Jefferson saw this coming.  I'm re-reading the Federalist Papers.

Mike in Tucson

Aug 11, 2011 01:42 AM
Keith Lawrence
Christie's International - Mahwah, NJ
ABR, SFR

Interesting post.

 

Bank of America was losing money back then and they are losing today.

 

Aug 11, 2011 02:37 AM
James Loftis
RealEstate911.com - West Palm Beach, FL
RealEstate911.com

Interesting post , thanks for sharing.

Aug 11, 2011 04:22 AM
Kari Battaglia, PA
RE/MAX Platinum Realty - Venice, FL
Love Where You Live

Hello Mike - This does bring back some memories.  I remember my father having a Diners Club card when we lived in NY.  Very interesting story did not know the history behind the credit card.  I am going to reblog this great story.  Thanks for sharing.

Sep 11, 2011 03:11 AM

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