A Brief History of Cash Back Credit Cards

Credit card issuers have not always been throwing cash at cardholders. The most popular type of rewards credit card has only been around a relatively short period of time.

It was in the mid 1980s that Discover Card burst onto the scene offering the first cash back credit card and it even had no annual fee. This was a big change when other card issuers were only giving rewards at certain companies with which they had strategic partnerships – primarily airlines and department stores.

Discover Card was able to offer cash back because this was offset by the fees they charged merchants as well as the interest fees charged to cardholders.

Unfortunately the high merchant processing fees that Discover was charging, initially led to few merchants accepting Discover credit cards. Over time more and more consumers began taking advantage of Discover’s cash back credit card offers. Eventually many merchants gave in and started accepting Discover Card. While they didn’t want to pay the high fees, it was either that or lose out on business.

As the Discover cashback cards gained popularity, other card issuers were forced to even the playing field. New cash back card offers were popping up from every major card issuer.

The shift had begun – the credit card industry was becoming a consumer’s market. Card issuers had no choice but to join the bidding war to gain new cardholders.