Sandeep Kumar Sood

Joe Williams and the Fresno Drop: How Unpaid Credit Cards Created the Modern World

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September, 1958. John Thompson is your average 40-something dad, working a nine-to-five job in Fresno, California to support his family of four. He has a mortgage that feels like a mountain, two kids in need of new school supplies, and a car that chose the worst possible moment to break down. 

Life was throwing curveballs faster than he could catch them, and his financial reserves had run dry. In a quiet moment at the kitchen table, surrounded by a stack of overdue bills, he buried his face in his hands and sighed. How was he going to get out of this mess?

That same afternoon, on September 18, John found a glimmer of hope in the most unexpected of places—his mailbox. Wedged between utility bills and promotional flyers was an envelope from Bank of America. Curious, he tore it open and was stunned to find a fully activated “BankAmericard” staring back at him. 

“What the hell is this?” John mused.

He had never heard of a “credit card” before. Was this like the Diner’s Club thing his wealthy neighbor had? Clearly not; the ad mentioned nothing about restaurants. For a few minutes John honestly thought this was some kind of scam. He hadn't applied for it, nor had he ever considered using a piece of plastic to buy anything. Yet, here was a letter offering him a $500 lifeline (over $5,000 in 2023 dollars, adjusted for inflation) that he desperately needed.

That’s when John remembered a magazine ad he saw that mentioned Bank AmeriCard. “So this is what they were talking about!” he thought. Maybe it was more legitimate than he first thought. So, John picked up his phone and called the local mechanic. Could he use this card to get his car fixed? 

It turns out, yes: Over 300 local Fresno merchants had signed up to accept Bank AmeriCard, but Bank of America had not yet persuaded the major retailers. So, while Thompson couldn’t go on a shopping spree at Sears just yet, he was able to finance some automotive repairs.

Then came groceries at the neighborhood store, which felt like a luxury after weeks of stretching meals. 

Then a few new outfits and a couple pairs of shoes for his kids at the local clothing outfitter. 

Of course, he didn’t stop there.

Thompson, like much of his generation, had come of age during The Great Depression and struggled in the post-war period to build a respectable lot in life as an adult. Now, at the doorstep of the 1960’s, everyone around him was living a solidly middle class life and Thompson desperately wanted to join them. So, why not get a new suit as well? Maybe even a gift for the wife at the local jeweler!

That’s exactly what he did.

Little by little, the card gave him breathing room, then satisfaction, then largess. For the first time in months, while the card was still active, John felt a weight lifted off his shoulders. Of course, the relief was short-lived. 

As he swiped the card to navigate his financial woes, John found himself sinking further into debt. The monthly statements began to pile up until the minimum payment was no longer affordable. The interest rates were unforgiving, and the late fees seemed to multiply overnight. 

Within months, Thompson’s miracle lifeline turned into a chain, pulling him deeper into financial quicksand. Eventually, he stopped making payments altogether. His account became one of the thousands that Bank of America had to absorb, the first wave of so-called “charge offs” generated by credit card debt.

Yet, somehow, this was ultimately considered a stunning success.

While Thompson’s troubles sound like a cautionary tale of unintended consequences, it was, in fact, part of a calculated gamble: the "Fresno Drop," orchestrated by a Bank of America executive with designs on popularizing the first revolving credit cards. 

Despite the individual stories of financial turmoil, like John's, this experiment achieved several much larger goals, but its originator had no idea that their success had opened a whole new frontier. The Fresno Drop did not just push the concept of credit cards into the public consciousness, it set the stage for multiple generations of revolution to come.

A sign of the times.

The Mind Behind the Drop

In the wake of the Fresno Drop, a single name became the focal point of both admiration and criticism: a 41-year-old Bank of America researcher and middle manager named Joe Williams. But who was this audacious man willing to gamble on a new form of financial transaction that turned traditional banking on its head? 

Williams was no ordinary researcher. With a background steeped in economics and a keen interest in technological advancements, he had always been a forward thinker. From early in his career, he showed a penchant for risk taking and innovative problem solving that set him apart from his more conservative peers. 

Where many saw the credit card as a risky venture, Williams saw a transformative tool. He viewed the inefficiencies and bureaucracies of traditional banking as challenges to overcome, not as immovable fixtures. For him, the path to the future was clear: automation, convenience, and universal accessibility. And the key to unlocking this future was the humble credit card, allowing for payments at multiple merchants. 

While working at Bank of America, which was a California-only operation in those days, Williams quickly rose through the ranks, but wasn’t without critics. The institution, one of the largest in the world today, was then almost entirely rooted in Fresno, where just short of half their customers lived. They had to play it safe, and Williams’ idea was dangerous. Parts of it, like sending people active credit accounts without a prior application, would even become illegal years later. Yet, he was able to sell the bank’s president on the scheme. 

The Fresno Drop wasn't a spur-of-the-moment decision, but the result of years of meticulous planning. Williams was smitten with the idea of the credit card, but at that time credit was a financial tool tied to individual merchants, requiring new loan applications at each. That’s where Williams saw untapped potential. 

He envisioned a future where payments could be seamless between merchants, where consumers wouldn't need to rely on the weight of coins or the constraint of paper bills, and loan applications were relegated to large purchases, with a revolving credit account supporting consumer spending. It was a vision that transcended convenience; it was about revolutionizing the very concept of transactions.

So, the great Fresno drop was launched. Sixty-thousand Fresno residents were randomly selected to receive the cards. The strategy was clearly fraught with risk. Sending out active credit cards to people who hadn't requested them was practically an invitation for misuse, but Williams was willing to bet the bank—quite literally—on the power of innovation to transform age-old habits.

A Calculated Gamble

Like so many pioneers, Williams would ultimately pave the frontier with his own bones. He resigned from his job within two years of the Fresno Drop, thinking that his audacious Bank AmeriCard program was about to be shut down. Despite his prior prognostications, Williams couldn't have been more wrong about the trial being a failure.

The audacious experiment of sending 60,000 unsolicited active credit cards to Fresno residents was actually a watershed moment in financial history. It was a risk, a considerable one, that Williams and Bank of America consciously took to push the envelope of traditional banking practices. And really, it wasn't just Williams who sank into despair. They all thought it was a failure, at first.

As the cards started arriving in mailboxes, the city of Fresno became a real-time laboratory for the future of finance. There was initial skepticism, of course, as people wondered why they were receiving credit cards they never applied for. There were those who discarded or destroyed the cards right away, viewing them as nothing more than an unwelcome intrusion.

There were others, like John, who decided to take the leap of faith. They began using the cards for their daily transactions, gradually realizing the convenience and efficiency they brought into their lives. However, this bold move was not without its pitfalls. The banking industry was rocked by the immediate consequences, with unauthorized transactions and fraud skyrocketing. Bank of America had to absorb these costs, resulting in substantial financial losses.

Bank AmeriCard’s losses were so substantial that more than 20 percent of the accounts had to be written off. Thieves figured out how to replicate the cards and defrauded dozens of merchants, who were already furious about paying a six percent fee on every transaction. Some unscrupulous merchants accessed the credit accounts to steal from their customers. The problems seemed to multiply with every passing week. It felt and looked like an utter disaster.

Despite these setbacks, the impact of the Fresno Drop resonated far beyond the financial statements at Bank of America. About five months into the Fresno experiment, another institution took note, and suddenly Chase Manhattan was doing something similar on the east coast. The twin experiments offered invaluable data about consumer behavior, helping the banks understand the need for enhanced security measures. It was a crash course in the vulnerabilities that the credit card system would have to address in the future. 

The media noticed too, and lapped up the audacity of the Fresno Drop. Business journalists and captains of industry watched fascinated as Chase Manhattan turbocharged spending in New York. This environment quickly drove bank dollars into media advertising, and the media reciprocated, offering the credit card experiment free publicity. 

Growing the institutional, media, and public awareness is what changed everything.

Bank of America, which had nearly killed the whole BankAmericard program after forcing Williams to resign in just the second year of the gambit, turned on a dime and went on to issue over 2 million cards that same year. The invention rocketed them from a regional bank in California to a national institution. Profits soared on the backs of $59 million in purchases during the card’s second year (that’s over $622 million in 2023 dollars, adjusted for inflation), one of the fastest uptakes of a financial product in history. 

BankAmericard would eventually become its own entity: the nonprofit consortium known today as Visa, which represents perhaps Williams’ greatest legacy, one that’s shared with another FinTech legend, Visa founder Dee Hock. Williams didn’t merely introduce a new payment method, he set the ball rolling for an entirely new financial paradigm, and others like Hock picked it up and ran further than anyone could have imagined.

Ripple Effects: From Plastic to Pixels

If the Fresno Drop was the stone cast into a still pond, then the ripples it created reached far beyond the world of traditional banking. Williams' audacious move didn't just change how we thought about credit, it fundamentally altered our relationship with money and paved the way for the digital financial revolution we are witnessing today.

The idea of "airdropping" financial assets into the laps of potential users found a new incarnation in the realm of cryptocurrency. Crypto airdrops, a concept that would have been science fiction during Williams' time, owe a conceptual debt to the Fresno Drop. Startups in the crypto sphere use airdrops to distribute a new token to existing holders of a particular blockchain currency, like Bitcoin or Ethereum, amplifying the value and reach of their coins right out of the gate. This method provides an almost viral mechanism for asset distribution, capturing attention and fostering a community around the new type of access to currency. It also carries some of the same disastrous risks.

The Fresno Drop's most enduring legacy may be in its democratization of access to financial tools. Just as Williams aimed to put the power of credit into the hands of the average American, cryptocurrency aims to do the same on a global scale. The barriers to entry are lowered, and the gatekeepers of old are being rendered increasingly irrelevant. 

The emphasis on security measures and fraud prevention that resulted from the Fresno Drop is what we are seeing in cryptography right now, especially after Sam Bankman-Fried’s FTX debacle. The Fresno experiment laid bare the vulnerabilities of financial transactions with credit cards, and could have provided a road map for crypto as well, but the pioneers of crypto seem to be learning Williams’ lessons the hard way.

In essence, Williams tore a hole in the fabric of financial tradition and peered into the future. That future is now our present, and it's reshaping the way we think about assets, value, and the very nature of money itself. The audacity of one man's vision continues to echo through the corridors of financial innovation, reminding us that sometimes a gamble can pay off in ways that are both profound and far-reaching.

Steer Toward the Fear

​​​​​As we look at the current landscape of finance, where traditional and digital forms coexist, it's clear that the Fresno Drop was more than a daring experiment. It was a calculated risk that fundamentally shifted how we interact with money and financial institutions.

Williams saw beyond the immediate challenges of his time, and today’s visionaries can learn a great deal from his tale. While many perceived a potential crisis, he saw a frightening opportunity and steered his institution directly toward that fear. His legacy isn't just in the physical cards we carry or the digital transactions we make; it's in the shift in perspective he initiated. 

What new innovations might arise from modern founders who think this same way, but actually incorporate the lessons of the Fresno Drop? I think that is the great question of our present moment, and the possibilities are more limitless than ever.