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36
ACCOUNTING

Tallying Up
 

A look at the medieval precursor to the credit card.
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When you buy something over the Internet with a credit card, usually you click your way through a maze of Web pages until you reach the final page that summarizes your transaction. That page will often carry the gentle reminder "Print me."

If you follow that advice, you can later compare the printed page with your credit-card statement to make sure that you haven't been charged for things that you didn't order. Basically, you follow the same procedure when you use your credit card in a store or a restaurant. The customer copy is your record of the transaction -- an identical match of the vendor copy that goes to your credit-card company.

Recording transactions in such a way that all parties involved have separate yet identical records of the details dates far back in history. Credit cards were introduced only about 50 years ago, but the need for strangers to exchange goods and services without relying solely on trust is perhaps as old as civilization itself.

It's likely that your great-great-grandparents were familiar with the use of "tally sticks." When a shopper traveled down the road to the baker or butcher without a coin in his pouch, the vendor might let him take home a hearty loaf of bread or a side of beef on credit. For every purchase made, the vendor would cut a small notch on one (marked) side of a small wooden stick. When the shopper returned and paid for the bread or beef, a corresponding notch was cut on the opposite side of the stick. The difference between the number of credit notches and the number of debit notches was a visible record of a customer's debt that did not require any reading or writing skills.


In the Middle Ages, tally sticks were the heavy-duty precursor to the credit card.


So far, so good. But who kept the stick? If the vendor kept it, how could the customer trust that he wouldn't secretly add some notches to his own advantage? Similarly, if the customer kept the stick, how could the vendor trust that the customer wouldn't do the same? The problem was solved by splitting the tally stick in half lengthwise so that all notches were visible on both halves of the stick. The vendor kept one half, and the customer kept the other. Relevant details of the transactions were sometimes recorded on the inside of the two halves of the stick, using identical wording on both copies.

For each new transaction, the vendor and the customer paired together the two halves of the stick. They could now add a new notch. More important, neither party could get away with adding notches on his half of the tally stick. Any attempt at fraud would be discovered as soon as the two halves were rejoined.

Tally sticks were used in England from the Middle Ages until the late 18th century. In 1834, after tally sticks had been abandoned in favor of paper-based methods of bookkeeping, the British government ordered a huge inventory of old tally sticks destroyed. That year the sticks were burned in the furnaces of the houses of Parliament. History books record that the fire from the burning tally sticks got out of hand and destroyed the Parliament buildings. The new buildings that replaced them in 1840 are still standing today.

In the 19th century it took fire to destroy records of financial transactions -- and the credit-recording tool itself. Today we use shredders and good old-fashioned scissors. At least when you cut up your credit cards, you won't burn down the house.

Gerard J. Holzmann is a researcher at Bell Laboratories in Murray Hill, N.J.


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Last updated: Jun 15, 2000




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