Tally Sticks | Bob Klein of Medici Capital

Credit cards are a fairly recent invention, but the concept of credit itself goes back in history. As a forerunner to today’s credit cards, medieval merchants actually developed an early version called a tally stick. With few literate people and currency regularly unavailable, the tally stick became increasingly popular in Europe. Tally sticks were a form of financial record keeping where notches were made on a wooden stick to indicate the amount of money lent and owed. 

Tally sticks were often made from willow branches harvested along the banks of the Thames and were about 8 inches long. The stick was split down the middle with the debtor retaining one half called the “foil.” The creditor would keep the other half, called the “stock,” and even to this day, British bankers use the word “stocks” to refer to debts of the British government. The natural characteristics of wood lent the tally sticks a unique quality: because of the distinctive grain, the two halves could only match each other, making them nearly impossible to counterfeit. 

Instead of keeping a record of these payments and debts in a ledger somewhere, the tally stick enabled something radical to happen. For example, if someone owned a tally stock showing that they were owed five pounds and didn’t think that their debtor could fulfill the payment, the stock might be worth that same among in its own right. As such, tally sticks were used as a form of money, essentially trading debt freely from one person to another. 

This system was used to collect taxes from locals for over 700 years until the system was abandoned in 1826. After decades of modernizing, the Exchequer replaced tally sticks with paper ledgers. To celebrate, the British parliament decided to get rid of the thousands of leftover tally sticks leftover in storage by burning them. They burned the tally sticks in an underground furnace that heated the House of Lords. Unfortunately, several cartloads of tally sticks in a coal-fired stove is a surefire way to start a raging chimney fire. The resulting fire engulfed the House of Lords in flames, then it was the House of Commons, and eventually almost the entire Palace of Westminster was burned to the ground.