Source : Free On-Line Dictionary of Computing

Chadless keypunch
     
         A {card punch} which cut little U-shapes in
        {punched cards}, rather than punching out a circle or
        rectangle.  The U's made a hole when folded back.
     
        One of the {Jargon File}'s correspondents believed that the
        term "chad" derived from the {Chadless keypunch}.  Obviously,
        if the Chadless keypunch didn't make them, then the stuff that
        other keypunches made had to be "{chad}".  The assertion that
        the keypunch was named after its inventor is not supported by
        any record in US or UK patents or surname references.
     
        (2000-11-22)