Credit Cards before modems

These days, when you pay by credit card, the card is swiped and a modem connection is made to secure approval of the charge.

Before the swipe function was perfected, the cashier would use the keypad on the modem to enter your credit card account number and the amount of the purchase.

Before that, your card would be inserted into a carbon-paper device, and a copy would be made of your card number with a roller and the purchase details would be written in by hand. So how did this method allow the merchant to confirm whether your account was good and you hadn’t exceeded the limit? How did the credit card company approve such a charge?

A follow up to that, I remember when my parents paid via card, the cashier sometimes looked at a book with a zillion numbers in it. What was the book for? Did it tell you good cards or bad cards?

I believe that the lookup book contained those numbers known to be invalid for one reason or another.

Right, you checked the book for known bad credit card numbers. If the purchase was over the business’s floor limit, you had to call the credit card company on the phone and an operator would (or wouldn’t) give you an authorization number. Sometimes, they’d have you request the customer’s driver’s license, to confirm their identity. If it was a bad card, you were supposed to confiscate it. At at least one point in time, there was a $25 reward for grabbing a bad card. When the purchase was ok to process, you used one of those imprinters, with carbon-paper credit card forms.

The book indeed had a list of card numbers that were bad for whatever reason. There was also a procedure for getting an approval number. You had to call a toll-free number.

ETA: Exactly what **3acresandatruck **. Right down to the reward.

Correct. I worked at a retail store in the late 70s for one summer and we had such a book. I think we were only supposed to look up a card for a purchase that exceeded a certain amount, but my memory could be faulty. This was before the cards were so ubiquitous and we did most of our sales with cash or the occasional check.

Yeah, you looked them up in a book that came out weekly, I think. (I started in retail just as things were switching over to swipe method.) If you found a bad one, you (the cashier) would get $50 so there was a finacial incentive to being diligent.

It sounds onerous but, in those days, a lot fewer places took credit cards and lot fewer people used them. Mostly you would use them at places like gas stations or department stores and many of those places only took their own store cards anyway. You didn’t start seeing the majority of places (like even grocery stores) take cards until about 1990 or so. (which I remeber vividly as I had just moved that year, was totally cash broke with only a credit card, and forced to survive on snacks I could charge at the local gas station)

I was one of those credit card operators. Here’s what we did.

If a charge exceeded the floor limit, or if the cashier was suspicious, they’d call us back in the main office. We had a list of all the cards reported as lost/stolen. If that checked out okay, we went to the ledgers. These were giant books with printouts of every customer’s name, credit limit and last year’s payment history. If their payment history was good and the charge didn’t put them over the limit, we approved the purchase.

If the charge was big, or their payment history was weak, we’d call a supervisor. The supervisor might actually speak to the customer about the problem, or just go ahead and approve it.

If the supervisor had questions, we’d run and get the customer’s file (yes, we had row after row of file cabinets with files filled with applications, forms, etc.) We’d scan the file for any history of problems, verify employment, etc.

We could do this suprisingly fast. If it was a routine purchase, we could approve it in less than a minute after we answered the phone. If a supervisor had to get involved, it might take 2-3 minutes. Kids who were using their parents’ cards, where we had to call the parent to get their approval, might take 5 minutes.

We in the back room didn’t get any reward for thwarting a fraudulent charge. I don’t know whether the cashiers did or not.

My older brother worked for a check verification/guaranty service that used similar methods. They’d look for multiple recent checks, sometimes pretext the bank to find out the customer’s balance, call the phone number given by the check writer (this was before cell phones were common, so if the check writer answered, it was a fair bet the check wasn’t authorized), check the driver’s license number against the coding system for driver’s licenses, and of course, check to see if they already had bad checks from the same person. They got this done very fast–all while the cashier was on hold and the customer was waiting to complete the transaction.

In addition to the book, you had a floor limit and would call the credit card company for approval of any charges above it. In theory, a stolen credit card could be used for many small purchases before the next week’s book came out, but any large charges had to be called in.

You had to write a confirmation number on the credit card slip or else it wouldn’t be accepted.

You were supposed to check the book for any charge. Again, if you allowed a number in the book to charge, you had to eat the cost.

Back in my first retail job, we were also told to call in any card that seemed problematic, whether it was in the book or not (customer acting unusually nervous, young kid with an Amex [rare in those days], etc.). We’d call the 800 number for approvals, rattle off the card info and then say “code 10”, to alert the operator. They might tell us to confiscate the card, or they might say it was okay… but if they said it was okay and it later turned out not to be, we were off the hook.

I did the same thing one year, sort of. My folks went on vacation for a month (this was when you could leave a 17 year old with his 21 year old sister and it was OK) and left me, $X for groceries and the gas card if I was in a bind. I had a job, so theoretically I should have been fine, but $X went for beer for me and my friends and by week 2 I was broke and once I realized I could pay for food with the gas card, forget it. Gas station nachos & hot dogs for all! It probably would have cost them less to take me with them.

A couple of years later, when out on my own, I wondered why the heck people would actually charge groceries though. I still won’t, though I use my debit card. My mom still does the check thing though.

This is a key point.

Back then, credit cards were much rarer. They were only given out to people with good credit, so bad charges were few and far between compared to now.

It was a pain in the arse.

I was a pimply eighteen year-old, and working in a very wealthy part of the city, my customers would invariably take great umbrage that I dared to go through the verification procedures. I was working in a liquor outlet too, so because these were classed as “temptation goods” (along with electronics etc), the total amount of purchase that required a verification phone call was much lower than for things like groceries. These were rich people buying expensive stuff, and they all had cards. I was on the phone all day.

And we (grocery stores) still get phone calls from crazies who ask, “Oh, do you take credit cards? Even at the grocery?” and all I want to say is, “Yeah. It’s 2008 over here. When is it where you are?”

Also noctilucent, Visa and MC still use Code 10 to signify a suspicious transaction. When you call for a manual authorization, you say “I have a Code 10 authorization” to the operator and you get a bunch of yes/no questions to determine whether it’s fraudulent.

Credit cards were fairly uncommon in NZ until relatively recently (mid-late '90s, IIRC), and by that stage EFTPOS systems were in place everywhere, so there was no need to do phone authorisations.

Prior to that, my Dad tells me that since the only people who could get credit cards were known to be good for the money, the charge was just put through using the zip-zap machine (the one with the carbon paper in it) and was generally assumed to be OK for smaller purchases. For large purchases (which was about all you could use credit cards for, besides petrol), they’d ring up the card issuer and verify everything over the phone.

I worked at the credit card back for years back in the early '80s. So I saw it from the inside. There were rooms full of people to answer the phones when the merchants called. They had terminals to look up the account holder information.

For merchants, there were a whole bunch of regulations regarding how they handled transactions and disputes. A charge could get bounced back to the merchant from the merchant’s bank, from the cardholder’s bank, or from a cardholder disputing the charge. So, it was always in the merchants best interest to jump through all of the hoops. If there was a dispute somewhere along the line the merchant almost always had to eat it.

Some con artists got very good at fooling merchants by using the system against them (talking their way into having the merchant use a hand written charge slips without a signature vs imprinted with signatures, etc.).

I remember reading Jimmy Buffett’s book about how he had to fly to Miami to get his first big break. He was dead broke, and the only thing he had was an expired company credit card. He talked about how he bought a plane ticket while holding his thumb over the expiration date and making idle chit-chat with the ticket agent. It worked, and the rest is history.

Now, today, an expiration date a key thing for a merchant to look for. What about then ~1971? Would the airline have ended up eating the cost for that ticket?

I worked in a department store in the early 80s. As others have said, there was the “book” of numbers. Quotes on that because it was in teeny tiny type, on newspaper stock.

I once sold an air compressor to someone with a stolen card. Called it in and got the approval code. About 18 months later a detective was investigating, and showed me some mug shots. (photo line up) After such a delay, I had zero ability to pick out the guy.

I’m also curious about the original question. 18 replies and no one has touched it…