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“He had three girls working on Burroughs bookkeeping machines, each handling 1,000 to 1,500 accounts. I looked at the size of the accounts: $4.58. $12.82. And h

“He had three girls working on Burroughs bookkeeping machines, each handling 1,000 to 1,500 accounts. I looked at the size of the accounts: $4.58. $12.82. And he was sending out monthly bills on these accounts. Then the customers paid him maybe three or four months later. Think of what this man was spending on postage, labor, envelopes, stationery! His accounts receivables were dragging him under.” I never got why credit cards were such a big deal for merchants, until reading this. I never got why credit cards were such a big deal for consumers, until I heard this: https://www.npr.org/2019/06/26/736352315/episode-922-the-cost-of-getting-your-money-back https://www.npr.org/2019/06/26/736352315/episode-922-the-cos... What a week of learning about credit cards it has been!

MBCook 7y ago
Isn’t it crazy to think that so many stores used to run their own credit books and have to do all that accounting and servicing by themselves? Every pharmacy, hardware store, grocery store... anywhere that wanted to accept credit had to do it all.
- derefr 7y ago
  What was the reason to “accept credit” in the first place, in an era when anyone with stable employment could have applied for a line of credit (i.e. a personal long-term loan) from their local bank, such that they could then pay these services with cash? I can understand credit as a natural extension of “running a tab” at a hotel or restaurant—you order now, and settle your account later, for various definitions of “later.” But why would a retailer be interested in offering private/internal credit that they had to manage and settle? Sounds negative-ROI to me.
  - vonmoltke 7y ago
    Well, for one it reduces friction, which increases the likelihood of making a sale. If a customer comes in to a store, but has to leave to go to their bank, there is a chance they won't return to make the purchase. Even if it is something they need, a competitor might lure them in between the point they get money from their bank and they get back to your store. The value, of course, depends on how many additional sales the reduced friction generates, versus the cost of maintaining credit books.
  - lucozade 7y ago
    In most cases they were just running a tab. Unless you make the customer pay a deposit up front, any gap between the purchase and the invoice being paid is an extension of credit.
  - ceejayoz 7y ago
    It's for scenarios like "I'd like to buy those $40 steaks, but I've only got $30 with me."
  - phire 7y ago
    So people didn't have to carry cash around. People would set up accounts at their local stores so all their common daily and weekly errands could be done without cash. Then once a month (after payday) they would take cash around to all the local stores paying their accounts. (Or write a check, I guess) Stores supported this because it was a form of lock-in, and because it reduced friction. Faster than exchanging cash too, or writing a check. When working correctly (the customer comes in and pays without prompting) it's super low effort. Especially for stores with only one location and checkout counter. Only really costs time and money when a customer requires chasing up.
  - scott_s 7y ago
    Because it is the norm. You're probably coming from the opposite frame, that requiring cash up front for all transactions was the norm. It wasn't. We've been extending credit and taking on debts for millennia. It's just how money works.
    - Slartie 7y ago
      It for some weird reason is not the norm in a large part of the world (the individual credit lines for every little store thing, not the debt-based finance system in general) where it has been totally the norm to bring cash into stores for those everyday purchases. You had cash on you anyway, because people have always owned wallets, and it's not that much of a burden to carry a wallet with you. It seems to me that this store credit thing has been very much a US thing, and it probably is the reason why credit-based electronic payment systems took over the US while at the same time debit-based systems accomplishing the exact same goal became dominant in many European countries. Funny thing: when it comes to gasoline, the roles are reversed. In the US, you get no gas if you don't first go into that store and prepay or provide a credit card that guarantees a payment. In most of Europe, you just drive up to the gas pump and fill up, and then you go into that little store in order to pay.
      - matthewowen 7y ago
        That's a nice theory, but having credit at stores etc was a thing in Europe too.
  - vmh1928 7y ago
    One reason is that in the old days people would run out of money before the next payday. The other is as an alternative to giving your kid cash to go buy something for dinner.
pavlov 7y ago
I was born in 1980, and do remember our family having a credit account at the local grocery store. This was in Helsinki, Finland. I think our account number was 14? Simple enough for a child to remember. Around age 9 I was using the account on my own to buy food after school. I'd state the account number, and the cashier would write the credit down with a pen into a special notepad they kept under the cash register.
- csunbird 7y ago
  We also had a similar system in Turkey too, with local grocery shops. The owner would have two notebooks per customer, one would stay at the store and one would be given to customer. Whenever you needed to buy something but you wanted to pay later, the merchant would put the transaction on his notebook with a copy on your notebook, so at the end of the month you would simply bring your notebook and cross reference the transactions and pay your debt.
  - Semaphor 7y ago
    Maybe it’s a Turkish thing? Because the owner of the copy shop I mentioned [0] is a Turkish immigrant ;) [0]: https://news.ycombinator.com/item?id=22047151 https://news.ycombinator.com/item?id=22047151
    - csunbird 7y ago
      It definitely could be!
  - imedadel 7y ago
    This is still very common in Tunisia too
- Semaphor 7y ago
  I’m having something like this for a copy-shop in a pop 200k city. In 2020. Not an account number, and essentially a manual debit account. The owner has a book with balances of people who pre-paid, when you print something, he looks you up in his book, edits in the new balance and then edits the balance on a piece of paper I have :)
throwaway55554 7y ago
Good grief! Why didn't she send a $1 first to make sure she had the right person!?
- adambard 7y ago
  Why do people make mistakes at all? Everything would be much easier if people would just be less fallable.
  - throwaway55554 7y ago
    Anyone who's ever set up direct deposit knows how this works. It's almost common sense.
    - kelnos 7y ago
      I imagine most people have not done that (I've mostly seen that when linking accounts like brokerage accounts online), and I don't think it's common sense. For setting up direct deposit at most workplaces (in the US, at least), you just give HR your bank routing and account numbers when you start and that's it. I've never gone through any kind of verification process.
- cushychicken 7y ago
  I don't know, but I know I've never thought of that. Pocketing this technique for future use!
kelnos 7y ago
> I never got why credit cards were such a big deal for consumers... For me, it's always been about that buffer between my actual money and the merchant. Sure, credit card rewards programs have been great, but having a middleman who is more or less on my side in all financial transactions is a game changer. If I use my debit card, the money is out of my possession; it's possible to get it back, but it's not certain, and while I'm waiting for that to happen, I don't have access to that money. (And if I use cash, I pretty much just have to accept that the money is gone the second it leaves my hands.) If I use a credit card, I still have the money, and can dispute the charge. Even if I don't notice the problem until after I pay my credit card bill, I still have a single entity (who, again, is more or less on my side) who will refund my money if I have a valid complaint, even if the merchant isn't playing ball or is a fraudster.
- xur17 7y ago
  My problem is that I'm effectively paying 2-3% in fees on every transaction for this privilege. If there was a way to pay (not cash) that removed this fee, and let me keep the savings, I'd do it for most transactions, even if it removed my ability to charge back transactions.
  - chipotle_coyote 7y ago
    My problem is that I'm effectively paying 2-3% in fees on every transaction for this privilege. If you pay your credit card bill off in full every month, you're not paying anything extra unless the merchant charges a premium for credit card transactions. If you carry a balance, you're paying on that, sure, but nothing requires you to do so. (Also, of course, you might be actually getting 1% or more back on credit card transactions, if they have cash back programs.)
    - xur17 7y ago
      > If you pay your credit card bill off in full every month, you're not paying anything extra unless the merchant charges a premium for credit card transactions. The merchant is paying extra, and that cost is hidden in the price I pay.
isoskeles 7y ago
When I first read this several hours ago, I was surprised and in agreement with the conclusion of that quote, that this would "drag down" the business. As those numbers seem very low for the costs associated with getting payment. But it should be pointed out that those numbers are in the context of a quote from ~1958. Back then, postage was $0.04. Also, $4.58 and $12.82 (as examples) would be worth $40.52 and $113.41 today. So I'm not actually sure if a 6% charge on sales would be worth it here. I don't know what the cost of labor would have been back then (assume minimum wage in that area in 1958 maybe). Anyway, the point is the numbers don't seem as alarming and obvious to me after looking up postage and inflation at the time.

MBCook 7y ago

Isn’t it crazy to think that so many stores used to run their own credit books and have to do all that accounting and servicing by themselves? Every pharmacy, hardware store, grocery store... anywhere that wanted to accept credit had to do it all.

derefr 7y ago
What was the reason to “accept credit” in the first place, in an era when anyone with stable employment could have applied for a line of credit (i.e. a personal long-term loan) from their local bank, such that they could then pay these services with cash? I can understand credit as a natural extension of “running a tab” at a hotel or restaurant—you order now, and settle your account later, for various definitions of “later.” But why would a retailer be interested in offering private/internal credit that they had to manage and settle? Sounds negative-ROI to me.
- vonmoltke 7y ago
  Well, for one it reduces friction, which increases the likelihood of making a sale. If a customer comes in to a store, but has to leave to go to their bank, there is a chance they won't return to make the purchase. Even if it is something they need, a competitor might lure them in between the point they get money from their bank and they get back to your store. The value, of course, depends on how many additional sales the reduced friction generates, versus the cost of maintaining credit books.
- lucozade 7y ago
  In most cases they were just running a tab. Unless you make the customer pay a deposit up front, any gap between the purchase and the invoice being paid is an extension of credit.
- ceejayoz 7y ago
  It's for scenarios like "I'd like to buy those $40 steaks, but I've only got $30 with me."
- phire 7y ago
  So people didn't have to carry cash around. People would set up accounts at their local stores so all their common daily and weekly errands could be done without cash. Then once a month (after payday) they would take cash around to all the local stores paying their accounts. (Or write a check, I guess) Stores supported this because it was a form of lock-in, and because it reduced friction. Faster than exchanging cash too, or writing a check. When working correctly (the customer comes in and pays without prompting) it's super low effort. Especially for stores with only one location and checkout counter. Only really costs time and money when a customer requires chasing up.
- scott_s 7y ago
  Because it is the norm. You're probably coming from the opposite frame, that requiring cash up front for all transactions was the norm. It wasn't. We've been extending credit and taking on debts for millennia. It's just how money works.
  - Slartie 7y ago
    It for some weird reason is not the norm in a large part of the world (the individual credit lines for every little store thing, not the debt-based finance system in general) where it has been totally the norm to bring cash into stores for those everyday purchases. You had cash on you anyway, because people have always owned wallets, and it's not that much of a burden to carry a wallet with you. It seems to me that this store credit thing has been very much a US thing, and it probably is the reason why credit-based electronic payment systems took over the US while at the same time debit-based systems accomplishing the exact same goal became dominant in many European countries. Funny thing: when it comes to gasoline, the roles are reversed. In the US, you get no gas if you don't first go into that store and prepay or provide a credit card that guarantees a payment. In most of Europe, you just drive up to the gas pump and fill up, and then you go into that little store in order to pay.
    - matthewowen 7y ago
      That's a nice theory, but having credit at stores etc was a thing in Europe too.
- vmh1928 7y ago
  One reason is that in the old days people would run out of money before the next payday. The other is as an alternative to giving your kid cash to go buy something for dinner.

pavlov 7y ago

I was born in 1980, and do remember our family having a credit account at the local grocery store. This was in Helsinki, Finland. I think our account number was 14? Simple enough for a child to remember. Around age 9 I was using the account on my own to buy food after school. I'd state the account number, and the cashier would write the credit down with a pen into a special notepad they kept under the cash register.

csunbird 7y ago
We also had a similar system in Turkey too, with local grocery shops. The owner would have two notebooks per customer, one would stay at the store and one would be given to customer. Whenever you needed to buy something but you wanted to pay later, the merchant would put the transaction on his notebook with a copy on your notebook, so at the end of the month you would simply bring your notebook and cross reference the transactions and pay your debt.
- Semaphor 7y ago
  Maybe it’s a Turkish thing? Because the owner of the copy shop I mentioned [0] is a Turkish immigrant ;) [0]: https://news.ycombinator.com/item?id=22047151 https://news.ycombinator.com/item?id=22047151
  - csunbird 7y ago
    It definitely could be!
- imedadel 7y ago
  This is still very common in Tunisia too
Semaphor 7y ago
I’m having something like this for a copy-shop in a pop 200k city. In 2020. Not an account number, and essentially a manual debit account. The owner has a book with balances of people who pre-paid, when you print something, he looks you up in his book, edits in the new balance and then edits the balance on a piece of paper I have :)

throwaway55554 7y ago

Good grief! Why didn't she send a $1 first to make sure she had the right person!?

adambard 7y ago
Why do people make mistakes at all? Everything would be much easier if people would just be less fallable.
- throwaway55554 7y ago
  Anyone who's ever set up direct deposit knows how this works. It's almost common sense.
  - kelnos 7y ago
    I imagine most people have not done that (I've mostly seen that when linking accounts like brokerage accounts online), and I don't think it's common sense. For setting up direct deposit at most workplaces (in the US, at least), you just give HR your bank routing and account numbers when you start and that's it. I've never gone through any kind of verification process.
cushychicken 7y ago
I don't know, but I know I've never thought of that. Pocketing this technique for future use!

kelnos 7y ago

> I never got why credit cards were such a big deal for consumers... For me, it's always been about that buffer between my actual money and the merchant. Sure, credit card rewards programs have been great, but having a middleman who is more or less on my side in all financial transactions is a game changer. If I use my debit card, the money is out of my possession; it's possible to get it back, but it's not certain, and while I'm waiting for that to happen, I don't have access to that money. (And if I use cash, I pretty much just have to accept that the money is gone the second it leaves my hands.) If I use a credit card, I still have the money, and can dispute the charge. Even if I don't notice the problem until after I pay my credit card bill, I still have a single entity (who, again, is more or less on my side) who will refund my money if I have a valid complaint, even if the merchant isn't playing ball or is a fraudster.

xur17 7y ago
My problem is that I'm effectively paying 2-3% in fees on every transaction for this privilege. If there was a way to pay (not cash) that removed this fee, and let me keep the savings, I'd do it for most transactions, even if it removed my ability to charge back transactions.
- chipotle_coyote 7y ago
  My problem is that I'm effectively paying 2-3% in fees on every transaction for this privilege. If you pay your credit card bill off in full every month, you're not paying anything extra unless the merchant charges a premium for credit card transactions. If you carry a balance, you're paying on that, sure, but nothing requires you to do so. (Also, of course, you might be actually getting 1% or more back on credit card transactions, if they have cash back programs.)
  - xur17 7y ago
    > If you pay your credit card bill off in full every month, you're not paying anything extra unless the merchant charges a premium for credit card transactions. The merchant is paying extra, and that cost is hidden in the price I pay.

isoskeles 7y ago

When I first read this several hours ago, I was surprised and in agreement with the conclusion of that quote, that this would "drag down" the business. As those numbers seem very low for the costs associated with getting payment. But it should be pointed out that those numbers are in the context of a quote from ~1958. Back then, postage was $0.04. Also, $4.58 and $12.82 (as examples) would be worth $40.52 and $113.41 today. So I'm not actually sure if a 6% charge on sales would be worth it here. I don't know what the cost of labor would have been back then (assume minimum wage in that area in 1958 maybe). Anyway, the point is the numbers don't seem as alarming and obvious to me after looking up postage and inflation at the time.