Was the Credit Card Really Invented in Flatbush?

History loves firsts, and it’s often stated that the first credit card was invented in Flatbush. But how could such an origin story be true? I know some guy didn’t fabricate a plastic card, walk into a store on Flatbush Ave, and successfully convince the cashier to let him “charge it.” So how does an entire way of paying for stuff come to be invented?

For answers, I went to a great book on the history of consumer credit in the United States — Debtor Nation by Louis Hyman — and I was surprised by what I found. Namely, that the credit card really was invented in Flatbush, and by one particular dude: John C. Biggins. But while Biggins may have invented the credit card, he wasn’t responsible for the regulations, big business, and literal machines that led to the almost inevitable implementation of a bank-issued card that allowed account-holders to make (and pay off) everyday purchases on an ongoing basis.

This tiny bank at 830 Flatbush Ave is where the credit card was born. Across from Linden Blvd, it’s now the site of a new(ish) residential building and an above-average dollar store. (photo: NYC Municipal Archives)

In Debtor Nation, Hyman does a beautiful job of laying out how it all happened. But first, a quick primer. Credit cards work on revolving credit, where you keep adding debt as you pay it off — the debt isn’t linked to any particular purchase, it’s just the amount you owe, and it may go up or down depending on the month. (If I’m making you think about your own balance right now, apologies.) Then there’s what’s called installment credit — this is like a car loan, where you owe a certain amount for the product you purchased, and you pay it off over time. When you make payments on installment, you’re paying specifically for that product, and when you’re done paying it off, the credit that was extended to you ends.

Before World War II, Americans always used installment credit when they wanted to buy something they didn’t have the money for — like cars, refrigerators, furniture, and (for lower-income Americans) clothes. Revolving credit, on the other hand, was used almost exclusively by local merchants like grocers, who knew their customers personally. (If you read my post about the advent of self-service grocery stores, you know what I’m talking about!)

But installment credit was severely limited during the War due to “REGULATION W,” which sounds like something James Bond would fight villains to keep from happening. Regulation W was enacted by the Federal Reserve in an attempt to make sure inflation didn’t get crazy-high like it did during World War I, and (spoiler alert) it changed American credit forever, and really not for the better.

Basically, the Fed figured that since the war was going to cause supply-chain issues for consumer goods, they could keep the supply-and-demand dynamic in check by also keeping demand low. To attempt this, they created Regulation W, which limited the amount of debt people could incur via installment credit. If people didn’t have installment credit, the thinking went, how would they be able to buy anything?

…Well, revolving credit, of course. Since it wasn’t covered under Regulation W, it took stores about 3 seconds to figure out that they could just switch the type of credit they were offering to still get the sale. Revolving credit had never really been used this way, and although Hyman writes that some stores felt a little bad about keeping their customers in perpetual debt, it turns out, their customers liked it that way.

One of the biggest reasons they liked it (besides that it afforded them a way to buy the things they needed) was because of the convenience. There was no longer a need to get a loan every single time you wanted to buy something at a department store — just tell the clerk your account number, or hand them the piece of paper they wrote the number on when you opened the account.

Enter the Charga-Plate

Making it even easier for both customers and merchants was the Charga-Plate. This metal card, which looked almost like a military dog tag, had raised letters and numbers that spelled out a customer’s name and address. This allowed the clerks at the store to find the account easily, but even better, they could use a mechanical contraption (also sold by Charga-Plate) to emboss the customer’s info onto a piece of paper, much like the “click clack” credit card machines many of us remember from before computers hit the scene. This was not only faster than writing by hand, but much more accurate.

Charga-Plate sold this system to many of the biggest department stores in New York, and because only a person’s name and address were on the cards (no account numbers yet), once you got your card, you could use it at several different stores. “It’s small enough to fit in your change purse,” a Charga-Plate ad in the New York Daily News extolled, “Carry it with you always.”

So surely these Charga-Plate people (aka Farrington Manufacturing) were located in Flatbush, the birthplace of the credit card? Nope, they were from Pennsylvania. But the reason why it’s often said that the credit card was invented in Flatbush is because of John C. Biggins, Jr., who worked at his father’s bank on Flatbush near Church. He noticed that the small businesses nearby had trouble competing with the big department stores in downtown Brooklyn where people could use their convenient Charga-Plate.

The war had ended, but Charga-Plate had become so ubiquitous that retailers would have to spend a ton of money to go back to another system — not only did Charga-Plate produce the cards, they also produced the typewriter-like machines that generated statements and form letters you could send to customers when their accounts were past due, simply by inserting the correct plate and pushing the corresponding lever for their interest rate. As Hymen notes, “Charga-Plate billing machines were not like computers today. They could not be reprogrammed. Farrington Manufacturing had hardwired assumptions about lending into the levers, relays, and gears of the accounting machines.” And even if Charga-Plate made new machines, that would mean added costs for every single merchant using one. Politicians were reluctant to make stores spend so much on something the public didn’t even want. And so, the government shrugged its shoulders…and never tried to regulate consumer credit ever again.

This tiny card fit into the Charga-Plate machine and made “charging it” super easy…and the machines made it so hard to change the rules behind consumer credit, they’ve stayed basically the same ever since. (photo: Digibarn)

A Nobel Spirit Embiggens John Biggins

John C. Biggins was smart enough to realize that Charga-Plate — and revolving credit — was here to stay. But small businesses didn’t have the money to buy the expensive Charga-Plate system, or even to extend their customers’ credit in the first place. So the young Biggins did something real smart. He had his dad buy a Charga-Plate for Flatbush National Bank, and he went to local shops that were bank clients and told them they could make use of it. Shop customers could sign up at a participating store or at the bank for Biggins’ “Charg-It” program, then use their existing Charga-Plate card at a number of nearby stores. At the end of the day, instead of depositing cash, the stores would submit a ledger of charges; those amounts would be deposited directly into their accounts. The bank then used the same Charga-Plate billing machines as the larger department stores to collect balances (and interest fees) from its account-holders.

Thus, sometime around 1950, the modern credit card was born under the shadow of the old Dutch church that still stands on the corner of Flatbush and Church today. (OK, the bank was farther down, across from Linden Blvd. But Biggins definitely saw the church when he was going on his lunch break.) The bank used credit bureaus, not personal relationships, to decide on people’s credit worthiness, and the merchants people purchased from had no idea whether they owed money or not. The bank was directly giving customers revolving credit accounts for consumer goods — a first.

It was a revolutionary idea, but this special credit card for Flatbush small businesses didn’t last long. Independent American banks like Flatbush National (and Flatbush Trust Company, down the street) — much like the Bailey Building & Loan in the classic film It’s a Wonderful Life — were not long for this world. Biggins’ dad, John Biggins, Sr., sold the bank to the much larger Manufacturers’ Trust Co., and when they took over, they were probably like “what the hell is this thing?”. It was quickly canceled, but Hyman reports that Biggins went over to Patterson Savings & Trust Company in New Jersey where he successfully implemented an identical program. Meanwhile, the Diner’s Club Card hit the scene, and it stole Flatbush’s thunder with a made-up, yet lengendary backstory about a guy forgetting his cash at a company dinner.

So there you have it: The credit card really was invented in Flatbush, because a guy in his family’s business was trying to look out for the small shops of Flatbush Ave. Kind of a cool origin story for something that has had such a huge impact on American lives.