A Brief History of Personal Debt

January 24, 2024

Personal debt, a universal facet of modern financial landscapes, has a rich and varied history that spans centuries. From the rudimentary credit systems of ancient civilizations to the sophisticated financial instruments of today, the history of personal debt reflects the complexities of economic, social, and cultural forces.

Why and when did we start accumulating debt?

The origins of personal debt can be traced back to ancient agricultural societies. The shift from hunter-gatherer societies to settled agricultural communities marked a significant turning point. With the advent of agriculture, people needed resources to invest in land cultivation, irrigation, and tools. In many cases, individuals or communities borrowed resources from others, creating a form of debt. The first notions of credit emerged as a means to navigate the challenges of agricultural life, allowing communities to share their resources and manage unpredictable harvests.

As societies transitioned from agricultural economies to trade-based systems, the need for credit intensified. Merchants required capital to finance trade ventures anticipating that profits from successful trades would allow them to repay their debts. This lead to the development of credit systems in ancient civilizations such as Mesopotamia and Greece. Written records documented loans, interest rates and repayment terms, forming the early foundations of financial transactions.

The introduction of money as a medium of exchange further facilitated debt. Instead of direct barter, people could borrow and lend money, making transactions more flexible. During the medieval period, guilds and craftsmen often relied on informal credit arrangements within their communities. Craftsmen borrowed from each other to fund their enterprises, creating a localized system of indebtedness.

The rise of modern banking

The Renaissance marked a turning point with the rise of modern banking institutions. In 15th century Italy, the Medici family pioneered banking practices that included personal loans. The shift from localized credit networks to formalized banking marked a significant leap in the evolution of personal debt.

In the 17th century wealthy merchants began to store their gold with the goldsmiths of London, who possessed private vaults and charged a fee for their service. The goldsmiths issued receipts certifying the quantity and purity of the metal they held and gradually they started lending money with promissory notes being issued.

The late 17th century saw the emergence of banknotes, which were hand written and issued against a deposit or as a loan. Printed banknotes as we now know them that did not require the payee’s name only appeared in the 1850’s. The first overdraft was provided by the Royal Bank of Scotland in 1728.

The 19th-century Industrial Revolution drove the rise of consumer culture, leading to the emergence of department store credit. Consumers could now purchase goods on credit, marking a shift from the earlier practice of bartering. This era laid the groundwork for the widespread use of personal credit in daily life.

The biggest enabler of personal debt

In the early 20th century, certain large merchants in America issued a Charga-Plate to regular customers, which was a precursor to the credit card. They were small metal sheets similar in size to a dog tag and was embossed with the customer’s name and details. The metal sheet was placed in an imprinter with an inked ribbon in a similar fashion to the old school credit card machines. These essentially became what we know as department store cards.

The biggest change in personal debt came in 1949 when Frank McNamara realised he had left his wallet at home as he received a restaurant bill. Luckily his wife was able to pay, but an embarrassed and humiliated Frank eventually invented the Diners Club card. This was the birth of the first modern credit card (strictly speaking a charge card) – initially a cardboard card being a type of IOU and accepted by a small, but growing group of restaurants. In 1958 American Express, the Bank of America’s BankAmericard (now Visa) and a bank alliance’s Master Charge (now Mastercard) all launched their credit cards. They were all general purpose credit cards accepted at various merchants and not just restaurants/hotels as was the case with Diners Club.

BankAmericard sent out 60 000 unsolicited cards via the mail each with a pre-approved limit of $300 (in today’s terms just over $3000). No credit checks were performed resulting in widespread fraud and delinquency and it was only in 1970 (12 years later) that these credit card mailings were prohibited. In this period approximately 100 million unsolicited credit cards had been mailed.

The globalization of credit cards allowed individuals to make purchases globally, contributing to a surge in personal debt. Advancements in technology, such as the introduction of magnetic stripe cards in the 1970s and the adoption of digital payment methods in recent years, have further revolutionized personal finance. Contactless payments, online banking and mobile wallets have definitely streamlined financial transactions but also introduced new challenges in managing personal debt in an increasingly digital world.


From humble beginnings in ancient agricultural societies to the complex financial systems of the present day, personal debt reflects the dynamic nature of human societies and their ongoing quest for financial flexibility.

Everyone knows about managing your debt in a responsible way. We know that high levels of debt can increase your financial risk, we must minimise unnecessary borrowing and try to pay off high-interest debts as quickly as possible.

Credit cards have become an integral part of daily life, offering convenience, flexibility, and purchasing power. However, the ease with which credit cards can be obtained and used has led to a complex phenomenon: the addiction to plastic money. The psychology of this addiction is a whole article in itself, however the ease with which credit is available is a massive risk and unlikely to go away any time soon.

Hopefully reading this may resonate for a few of us and make us view debt slightly differently.

Warrick Asher

General Manager – Business Development, BarnOwl GRC.