44

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?

  • 3
    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. – Andrew Lazarus Aug 30 at 17:52
  • 2
    I recall these being called "zip-zap" machines - it never occurred to me that they might be known as something else – Midavalo Aug 31 at 4:49
  • 2
    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 at 8:16
  • 7
    These are still in use: last encountered one in 2018 at a school event in NC. – jmoreno Aug 31 at 11:49
  • 2
    “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 at 16:14
52

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.

  • 9
    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 at 15:21
  • 4
    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 at 20:37
  • 2
    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. – Spehro Pefhany Aug 30 at 22:34
  • 5
    @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 at 23:00
  • 1
    @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 at 1:26
38

Up to a certain dollar figure, the issuers indemnfied the merchant from fraud.

Above that dollar figure, the merchant made a phone call into an agent-driven or automated system, and supplied your merchant ID, the credit card number and expiry. Soemtimes, the agent would ask you to hand the phone to the customer. If approved, you were indemnfied.

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.

  • 1
    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 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 at 8:32
  • 1
    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 at 8:56
21

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.

  • 23
    It's worth adding that low margin businesses like grocery stores simply didn't accept credit cards. – The Photon Aug 30 at 17:42
  • 3
    @The Photon: FTM, the one I mostly shop at (WinCo) still doesn't. – jamesqf Aug 30 at 17:51
  • 1
    "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 at 0:33
  • 1
    "Stores didn't verify cards". That's not my experience. Many stores would phone in to check the card. – Martin Argerami Aug 31 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. – Loren Pechtel Sep 2 at 19:57
0

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.

-6

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.

  • 21
    Any reliable source for your claims about the good old times? – Quora Feans Aug 30 at 21:31
  • 11
    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. – Zach Lipton Aug 31 at 1:00
  • 20
    This answer seems to suggest that dishonesty is largely a recent invention. That is simply, patently, distinctly untrue. – Lightness Races with Monica Aug 31 at 22:22
  • 2
    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 at 0:18
  • As I recall, stores did maintain lists of who not to trust checks from. – Kimball Sep 2 at 14:35

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.