Old people, how did you protect purchases before widespread use of credit cards?

[ArticMine]

Some common methods of payment before the widespread use of credit cards. I am talking about the 1960's and early 1970's here

In person:
Cash
Personal or company cheque.
Certified cheques
Cash on delivery (COD)
Traveller’s cheques (Hotels, and some larger stores)

For mail order
Personal or company cheque
Cash on delivery (COD)
Postal money orders
Wire transfer

The characteristics of all or these payments methods is that they are not reversible and with the exception of cash the payer could prove that the payment was made. This means that if the payer has recourse against the receiver of the funds, which is the case in many cases, the payer is protected. The receiver or merchant is protected in all the cases except for cheques because the payments are not reversible. With cheques the receiver or merchant was at risk only until the cheque cleared.

To understand how this is related to credit cards and later Bitcoin, one should take a look at the history of credit cards. When they were first introduced they behaved in a manner very similar to traveller’s cheques. They were intended for in person transactions. The transaction was valid and binding provided the signatures matched. Only unlike a traveller's cheque one signature was on the card and the other was on the slip.  The advent of “card not present” transactions first with telephone and mail order and later over the Internet means that there is no proof that holder of the credit card has agreed to the payment. This is and not “protecting the consumer” is the fundamental basis for chargebacks. The credit card industry has failed merchants and consumers here in a big way since merchants are presented the option of either not making the sale or accepting the chargeback risk, while consumers have to provide all sorts of personal information in an attempt to mitigate a risk not of their own creation. The latter leads to the risk of "identity theft" which is also a result of the way the banking and credit industry does business. There is no valid reason for the credit card industry to not be able to securely make online transactions binding on the payer after two decades of e-commerce and avoid the whole chargeback issue other than their own inertia and incompetence.  

Bitcoin is in effect turning back the clock to a much saner time when it comes to at distance payments. The key for the payer here is to obtain proof of payment. How? The receiver or merchant must in some form or another communicate to the payer the Bitcoin address for payment. As long as the payer can link this Bitcoin address to the receiver or merchant the blockchain record can be used as a receipt for payment just like the cheque or money order 50 years ago.

If there is a need to provide protection to the payer over and above the recourse of having a receipt this can still be provided by a trusted third party without the added unnecessary complexity of the payer denying that the payment was valid. Bitcoin can actually facilitate this further with multi-signature transactions.

[wasserman99]

I have noticed a number of threads in the hardware forum where people are advising others to not buy any equipment with bitcoins. Only use paypal, credit card, etc.. so that you have recourse if the supplier does not deliver a product on time.

If miners are unwilling to purchase equipment using bitcoins, it seems to be a bad sign for the entire bitcoin ecosystem.
So I started to wonder, what did people do before debit and credit cards were widespread?
Mail order goods have been around since before credit cards. Did people simply put money in an envelope and hope for the best? Was there any sort of protection or recourse for consumers who did not get their product?

What can we learn from the old timey cash economy and apply it to a bitcoin economy?

Perhaps the real problem is just the arms race to get better equipment before everyone else and ensure you get a return.
This could result in people simply making the unwise choice of sending off bitcoins before it might be appropriate to do so.

I'm not sure what to answer for the whole what people did back then in regards to fraud, but I guess there was less fraud back then due to there not being e-commerce shopping so you easily knew where your funds were being sent to because you sent them there.

I could be wrong and fraud was a big issue back then in regards to paying for items but that's just my $0.02.

I agree. A lot of the fraud today is possible because of the internet. Credit cards had been around for years (really decades in some form) before the internet so the need for the kinds of protections that credit cards provide were really not there. A customer would be able to look at an item prior to paying for it and if they later had a problem with it they could go back to the store and see if it could be replaced (with most major, reputable retailers this was not, and is still not a problem because they do not want to be known to sell defective merchandise and could just return it to the manufacturer). 

[GigaCoin]

We used checks. For high value transactions, cashier's checks. I don't know how this transfers to a bitcoin environment. Oh, there wasn't as much mail order back then. Most shopping was local.

We miss you Hal

[ensurance982]

Not that old myself, but I guess that people weren't buying stuff via mail, phone, etc. that often. Also, they just didn't buy stuff from someone they barely knew. Retail shops, where you get your goods immediately are much less likely to scam you, after all.

[galbros]

Montgomery Ward and Sears & Roebuck built huge empires at the turn of the 20th Century via mail order.  Most of the payment methods have been discussed - Collect on Delivery, US Postal Service money orders (why robbing mail trains was so lucrative), checks and even cash in the mail for the truly brave.  In addition, Sears was famous for its unconditional money back guarantee.  This goes towards the whole overcoming opportunism problem.

However, this is not to say that fraud was not a problem.  Look at the financial markets of the time, there were scams a plenty, Mr. Ponzi himself, and even in legitimate companies insider trading was endemic.

[MightyStorm]

I'm not sure that here is a lot of senior citizens.