B. The Evolution of Plastic Cards

• Author: M.H. Ogilvie
• Profession: LSM, B.A., LL.B., M.A., D.Phil., D.D., F.R.S.C. Of the Bars of Ontario and Nova Scotia Chancellor's Professor and Professor of Law, Carleton University
• Pages: 346-350

Page 346

Although debit card transactions involve immediate payment, rather than the extension of credit for a limited period of time, the use of plastic tokens to initiate payment transactions began with tokens used in the context of credit, rather than immediate payment. The earliest such tokens, usually in the form of a coin, originated in American retail stores prior to World War I as a means of identifying customers to whom those stores extended credit. They could be used only in the stores that issued them and that anticipated repayment on a regular, normally monthly, revolving credit basis. Retail-issued cards¹remain as one category of plastic card now in widespread use by retail stores and gas companies, and they continue to be distinguished from bank-

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issued cards in two legally significant ways: (i) they are bipartite cards in that the cardissuer and merchant are identical, so that two parties only are involved, the customer and the issuer; and (ii) credit is extended on a revolving credit basis, sometimes with no credit limit, provided minimum monthly instalments are made.

The second type of card to emerge, in the 1950s, was the so-called travel and entertainment card,²which is a tripartite card system involving the cardissuer, a private company, the merchant, and the cardholder. Sometimes called a "charge card," this card operated like a credit card prior to the introduction of the credit card, since it involves three separate contractual relationships: cardissuer-cardholder, cardissuer-merchant, and cardholder-merchant. Originally these cards required the cardholder to repay the entire monthly balance or to lose the privilege of holding a card, but some charge cards are now indistinguishable from credit cards because they offer a line of credit that can be maintained, provided a minimum monthly payment is made. Today, these cards are distinguished from credit cards by virtue of being made available to higher-net-worth individuals than credit cards, and they are therefore associated with higher social status. They are no longer legally distinctive.

The third plastic card to develop was the cheque guarantee card. Introduced in the United Kingdom in the mid-1960s, it was briefly marketed by several Canadian banks in the mid-1970s but was discontinued and is not used in Canada today. Its use continues in the U.K., although this appears to be waning there as well. A cheque guarantee card is a plastic card issued by a bank for use in conjunction with cheques. In Re Charge Card Services Ltd.,³

Millett J. described the card as creating an obligation by the bank to the payee of the cheque that the cheque would be honoured up to the value embossed on the cheque guarantee card. Typically used in a retail store by showing the merchant the card, the drawer is essentially representing to...