Credit Cards

At the beginning of 2000, Kiplinger's Personal Finance Magazine asked its readers to name which modern financial change had the most effect on them personally. The vast majority named the invention of credit cards. These small plastic rectangles, which most businesses now accept in place of cash, have become an everyday feature of modern life. The cards allow shoppers to take a purchase home one day and pay for it later. Credit cards have brought convenience to those who use them. They have also changed the way people both spend and save money and have therefore brought enormous changes to the world economy.

Department stores first introduced the charge card in the 1920s, usually a small metal plate imprinted with the customer's name. These "charge plates" inspired loyalty to the store that issued them because they could only be used at that store. In 1950, a New York man named Frank McNamara (1917–1957) had the idea of starting a credit company that would allow its customers to charge at many different places. His company, the Diners Club, collected a fee from participating restaurants and issued a card that allowed members to charge meals at all those restaurants.

The next step came in 1958, with the Bank Americard (now called Visa), issued by Bank of America. This card was accepted by many stores and businesses, and it added an exciting new feature. Instead of paying the total bill at the end of each month, as had been the usual policy with credit, customers could pay only a portion of their bill, rolling the remaining amount over to future months. For this privilege, however, users paid high interest rates (fees charged for borrowing the company's money). Other cards continued this profitable policy, notably the Master Charge (later renamed MasterCard), which was introduced in 1966.

Not everyone greeted the arrival of credit cards with enthusiasm. Many, including U.S. congressman Wright Patman (1893–1976) of Texas, called in the 1960s for an end to such easy credit. Patman argued that people would spend more money than they had and never learn to save or manage their finances. Credit cards have since become increasingly easier to get and use. There are still many who fear that they allow working people to become trapped by their debts. Others worry that credit cards encourage a society that values easy spending and consuming more than it values hard work and saving.

However, the use of credit cards continues to grow. In 1965, as the industry was getting its start, 5 million Americans had credit cards. By 1996, more than 1.4 billion cards were in circulation, charging $991 billion worth of purchases each year. Some kinds of shopping, such as automobile rentals and online buying, are almost impossible without a credit card. The widespread use of credit has given birth to its own brand of crime. Credit card theft and credit card fraud (using trickery and cheating) have become major problems.

—Tina Gianoulis

For More Information

Ecenbarger, William. "Plastic Is as Good as Gold." Reader's Digest (May 1989): pp. 37–43.

Green, Meg. Everything You Need to Know about Credit Cards and FiscalResponsibility. New York: Rosen Publishing, 2001.

Miller, Ted, and Courtney McGrath. "Power to the People." Kiplinger'sPersonal Finance Magazine (January 2000): pp. 82–85.

Nocera, Joseph. A Piece of the Action: How the Middle Class Joined theMoney Class. New York: Simon & Schuster, 1995.

Ritzer, George. Expressing America. Boston: Pine Forge Press, 1995.

Shepherdson, Nancy. "Credit Card America: How We Became a Nation of Instant, Constant Borrowers." American Heritage (Vol. 42, no. 7, November 1991): pp. 125–33.