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Back in the 1980's, many major retailers in the United States would accept credit cards using what was sometimes called a "knucklebuster" - a hand-operated device that would take a carbon-copy impression of the customer's credit card and produce a receipt for them to sign. Smaller businesses continued to use those devices into the 1990's, presumably because the new-fangled online terminals were expensive. I even recall some rural general store-type establishments using knucklebusters as late as 2005. The receipts produced by these devices were presumably then mailed (or possibly faxed) in for processing, leaving some significant latency.

How did merchants verify the acceptability of a credit card back then? Nowadays, even every little rural general store seems to have a high-speed Internet connection that they use to instantaneously verify the customer's card with the bank. What prevented a 1980's bandit from going on a spending spree with a stolen, altered, or revoked credit card and then moving on to the next town before the bank got around to mailing out "card declined" notices to the scammed retailers?

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    Watched a TV episode long ago where some young thieves are trying to use a stolen credit card, get tripped up by new technology. (I think they were counting on a phone outage to make merchants go back to the manual processors.) Hawaii 5-0? Couldn't find it in an index of episodes. Aug 30, 2019 at 17:52
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    I recall these being called "zip-zap" machines - it never occurred to me that they might be known as something else
    – Midavalo
    Aug 31, 2019 at 4:49
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    Last time I saw one was around 2001 when I locked myself out of my apartment and had to call a locksmith. Presumably they were still used for their mobility.
    – pipe
    Aug 31, 2019 at 8:16
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    These are still in use: last encountered one in 2018 at a school event in NC.
    – jmoreno
    Aug 31, 2019 at 11:49
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    “Every little rural … high-speed”—dunno about that. I was at an ATM and a store customer had to wait for the ATM and its dial-up modem to release the phone line before the cashier could make a credit card sale. Last year.
    – WGroleau
    Sep 1, 2019 at 16:14

8 Answers 8

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How did merchants verify the acceptability of a credit card back then? Nowadays, even every little rural general store seems to have a high-speed Internet connection that they use to instantaneously verify the customer's card with the bank. What prevented a 1980's bandit from going on a spending spree with a stolen, altered, or revoked credit card and then moving on to the next town before the bank got around to mailing out "card declined" notices to the scammed retailers?

When I was a kid in the 60's and 70's until I was a young adult sometime in the 80's the method was to use a book to verify the cards. This book came out each month that listed all the cards that had been cancelled. The pages of the book were tissue paper thin. When you gave the cashier the card they looked up the number in the book. If it wasn't listed it was safe to accept. I have to assume that as long as the merchant followed the rules they were protected, and the losses were handled by the credit card company during the period between books.

I even remember asking about this process at one point. It was obvious that the delay to print and distribute a new book to every cash register was a problem. This system could not even address the issue of exceeding the credit limit.

We still use a similar (but more advanced) system for handling PKI today. Each signing CA keeps a list of all revoked certificates, the software can consult this Certificate Revocation List (CRL) to know even the cert has been revoked. The person accepting the cert is supposed to check the CRL, with guidelines of what to do if the network is down, and how often they are supposed to get a new CRL file.

The system of the bad credit card list was the best they could do at the time. A store I worked at in the early 1980's even had a book they gave to the customer service stations to make sure that the person returning an item without a receipt wasn't on their list of having returned other items with out receipts to other stores in the area. If they were on the list they were probably dealing in stolen items. I have no idea if that list worked or not.

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    In the UK during that sort of time shops tended to have a "house limit" (that varied between stores, and was adjusted up/down periodically). Below that, they just used the Imprinter (still available on Amazon!). Above the limit, they would phone Access or Barclaycard etc. who would check the card and might give them a question to ask the customer. Some places may have had lists (much smaller than your book) of stolen or being-used-fraudulently card numbers to check against.
    – TripeHound
    Aug 30, 2019 at 15:21
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    I was a cashier in those days, and those books were awful to use. I don't know how many numbers were listed in the books, but it couldn't have been more than a few hundred. Maybe 500 max. I was always surprised, because I figured there would be thousands of numbers, not hundreds.
    – Mohair
    Aug 30, 2019 at 20:37
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    I remember the printed lists. They also checked photo ID such as drivers' licenses occasionally, especially for large transactions of high-value merchandise, so a thief would have had to relatively quickly forge the photo ID too in order get way with it (not as easy then as now). I vaguely remember a phone call being involved with a relatively large (Amex, I think) transaction where I was asked to talk to a representative. Aug 30, 2019 at 22:34
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    @TripeHound - I'm pretty sure the US had the same thing, but here it was called the "floor limit". It was the highest amount that could be accepted on a credit card "on the sales floor", without going and calling the bank to verify. The concept still exists for dealing with network outages, actually.
    – Bobson
    Aug 30, 2019 at 23:00
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    @Bobson The term "house limit" is almost certainly my own invention: I know the process existed; not necessarily what it's official name!
    – TripeHound
    Aug 31, 2019 at 1:26
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Up to a certain dollar figure, the issuers indemnified the merchant from fraud.

Above that dollar figure, the merchant made a phone call into an agent-driven or automated system, and supplied their merchant ID, the credit card number and expiry date. Sometimes, the agent would ask the merchant to hand the phone to the customer. If approved, the merchant was indemnified.

If you have heard about the "liability shift" relating to chip cards, that relates to that indemnification.

I was involved in the back office of a big ticket retailer in the 1980s-90s.

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    This is the actual answer. When calling, they would get the "authorisation code", which would be written on the paper receipt. In addition to the merchant and credit card details, I believe the amount of the transaction was given as well, at least in some circumstances.
    – jcaron
    Sep 2, 2019 at 8:28
  • Note also that even when authorisation moved to electronic for most transactions, there was a special return code "referral" which required the merchant to call for additional checks (sometimes involving talking to the customer for verification). Some merchants didn't know how to do that (or didn't want to) and considered referrals like rejections.
    – jcaron
    Sep 2, 2019 at 8:32
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    Calling the bank and then having the bank verify the customer over the phone is something still done. When I (not too long ago) moved from USA to UK and wanted to buy a mobile phone, I was paying with my American-issued Amex card. The store (carphone warehouse) employee called a verification line and handed me the phone for some sort of check where I was asked to confirm that the card was indeed mine (the verification was benign, definitely not a fraud itself, something like "confirm the first and last letters of your password - or something like that)
    – Aleks G
    Sep 2, 2019 at 8:56
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Stores didn't verify cards. If the card wasn't expired, they used it. At best they might ask for a driver's license to match the name. If they were particularly worried, they could call the bank to verify the account. In other words, the same way they accepted checks.

As noted by The Photon in the comments, many (maybe even most) stores didn't accept credit cards. My experience in the 80s was that your most likely place to accept them were department stores (which tended to be store cards) and high end restaurants.

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    It's worth adding that low margin businesses like grocery stores simply didn't accept credit cards.
    – The Photon
    Aug 30, 2019 at 17:42
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    @The Photon: FTM, the one I mostly shop at (WinCo) still doesn't.
    – jamesqf
    Aug 30, 2019 at 17:51
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    "If the card wasn't expired..." - Or in the book of bad card numbers. We used to call them blacklists, but I don't know the official name.
    – jww
    Aug 31, 2019 at 0:33
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    "Stores didn't verify cards". That's not my experience. Many stores would phone in to check the card. Aug 31, 2019 at 22:44
  • Depends on the transaction size. Back in 1983 my mother used a card a couple of times for fairly low-dollar purchases not knowing my father had lost his and cancelled it. No problems, afterwards talking to the card company she told them the charges were legit. Sep 2, 2019 at 19:57
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It was 1982; I was in my early 20s and working my first adult job. I applied for the original American Express card which was a NPSL charge card. They used to mail out card applications back then; that is how I got my card. I remember the activation fee was $35. There was no interest charged. I didn't use it for a month or two then used it on a vacation. I paid my bill when it came in and all was OK. All tolled I may have used the card 2-3 times in the year I had it. I wasn't into credit cards that much back then. During the Christmas season I used it but for some reason it didn't get paid. About a month later I went to rent a car and they knew the card had a holdup on it or a note to call their office. It seems the cashier I presented the card to was to phone in for card approvals. The clerk then gave me the phone, in which the office representative informed me that I didn't pay my last month's bill. I gave some lame excuse as to why I didn't pay my bill but I would pay it very soon. The representative asked me if I was still working. The representative said she was cancelling my card but would allow me to rent a car. I watched as the car rental agent cut the card in two.

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I worked at a gas station ~1988. We still used a "knucklebuster" to process credit cards, however, we had a separate swipe terminal inside the station for verification. This apparently was a stripe reader coupled with a modem that would call into a dedicated computer to verify the credit card.

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There were several different ways to verify the card.

On The Spot

ID: Merchants could ask for an ID to match the name on the card to the name on the face. That didn't always work (especially in the US) because not everyone carries ID with them, or even has any.

Signature: The merchant would try to match the signature on the back of the card to the signature on the slip. The customer had to sign the card when it was delivered to them and provide a signature card to the issuer to verify the signature, similarly to checks.

We still have signature strips on cards until this very day, even though no-one ever bother to check them anymore because they're no longer authoritative (you apply for a card online, they don't actually have a signature sample for you anymore).

Lists of Cancelled Cards: These were published regularly by the processors, but they were not exhaustive or updated online. So you'd get a huge book (like a telephone book, remember those?) to go through to see if the card number is in there, and if it is - you'd refuse to accept it. If it isn't - it might show up in the next one, but you wouldn't know because it just got stolen.

Calling the Processor

Merchants could call their card processor to request what is called "authorization code". The processor would then call (later - communicate online) the issuer to verify the card is valid, the credit is available, get the issuer's authorization code and then provide the authorization code to the merchant. The merchant would write the authorization code on the slip as evidence that the transaction was authorized.

In some cases they'd call and the card was actually reported stolen or forged. In this case they'd get a response from the processor asking them to destroy the card on the spot. Nowadays they don't do it anymore and instead just send a "Decline" response, but I still remember days where merchants would take scissors and cut stolen cards because the processor told them to (I was working for a credit card processor for a while early in my career). The processors stop doing that because it was putting merchants at risk, but until then merchants had to comply if they wanted their indemnification.

Each merchant has a transaction value limit above which they must get an authorization code to be indemnified in case of fraud.

What Happens Nowadays

Nowadays almost no-one does physical on-the-spot verification. Lists of cards and calling the issuer are still there and are used for magnetic strip transactions (most cases instead of a phone call by a person it would be done through an online internet connection by the cash register computer itself, making it much faster). The lists of cancelled cards are now also updated online, but they're still not exhaustive (usually only have the cards cancelled recently, since otherwise the list would grow endlessly).

Newer cards with chips allow verification of the card itself on the spot, but still don't answer the questions "is the card stolen" or "is the credit available for this purchase", for which a communication to the processor has to be made. But it does allow limiting communications to higher values, making low-value purchases go faster and smoother.

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I got an American Express card in 1982. I filled out an application that came in the Sunday newspaper. It was my first adult job. I took a summer vacation and used the card a time or two after that. I used it at a Sheraton hotel where the clerk had a live terminal. The American Express card was a charge card back then meaning it had to be paid in full each month. I missed a payment one time then got held up on a car rental because of the missed payment the month before. The car rental agent was on the phone with the American Express representative then she handed the phone to me. The card representative told me they would allow me this one charge but was having the car rental confiscate my card and cut it in two.

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In a nutshell, there was a lot more trust in honesty. That's also how paper checks could ever work - trust. People didn't game the systems in use as much, and merchants trusted that if you had a credit card, you were trustworthy.

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    Any reliable source for your claims about the good old times? Aug 30, 2019 at 21:31
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    The good old times aside (early credit cards were rife with fraud and delinquincies, there's an important point here that many businesses took paper checks, and those suffered from similar vulnerabilities: the check could be fake, the account could be closed, the account could have no balance, etc... There were check guarantee cards that tried to address some of the same issues for merchants as early credit cards. An insecure system was still acceptable if it wasn't worse than checks. Aug 31, 2019 at 1:00
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    This answer seems to suggest that dishonesty is largely a recent invention. That is simply, patently, distinctly untrue. Aug 31, 2019 at 22:22
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    the same forces that make it easier to verify a card, also make it easier for the stolen card numbers to spread. now, the fraud can be done from a third-world country.
    – Rob
    Sep 2, 2019 at 0:18
  • As I recall, stores did maintain lists of who not to trust checks from.
    – Kimball
    Sep 2, 2019 at 14:35

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