The concept of credit has existed for thousands of years. Even in ancient times, people would borrow goods or money, whether at a marketplace or to pay taxes. This idea of borrowing to make ends meet laid the foundation for credit cards. The availability of bank loans helped shape the United States after wars and economic depression. Some historical accounts suggest that banks often made loans even when they didn’t have sufficient funds, relying on the payments of borrowers to sustain their operations.
The first credit card, issued by the Diners Club in 1950, came about as a result of an embarrassing situation. The founder found himself unable to pay for a business meal because he had forgotten his wallet. His wife rescued him by covering the bill, but the experience led him to think of a way to avoid such situations in the future. Today, Diners Club International continues to offer memberships to global travelers.
By 1959, buying a home was nearly impossible without taking out a loan. Unless someone could build their own house, they needed financial assistance, often in the form of a bank loan or credit line. At that time, even lumber stores would extend credit if a person had a steady job and trustworthy reputation. A typical couple wanting to buy a home had to rely on a bank loan, and if a man qualified for a mortgage, he was often encouraged to get a credit card as well. Banks understood that most Americans had stable jobs and could handle monthly loan payments along with a small credit card balance. Banks also began advertising heavily, especially around Christmas, contributing to the “Keeping up with the Joneses” phenomenon. Families were eager to buy the best items featured in department store catalogs to create stylish and welcoming homes, a trend that became especially popular in the 1960s when entertaining and social drinking clubs were all the rage.
By the 1980s, consumers had become infatuated with acquiring the latest technology, and credit cards were becoming increasingly common. Carrying debt wasn’t seen as problematic, and small monthly payments were viewed as a fair trade for the latest microwave or gadget. Credit scores were not a concern—people were more interested in the things they could buy. By the late 1980s, however, debt was starting to become a significant issue. Credit card offers were so abundant that it wasn’t uncommon for people to have wallets filled with credit cards—eight or nine at a time was typical, with some carrying as many as 16 or more. Cards from major banks like Bank of America, Chase, Wells Fargo, and store cards from popular retailers like Sears became status symbols.
Today, credit scores are critical to nearly every financial decision. Building credit is no longer as easy as it once was. Young families often need at least three times the income of a house payment or rent just to qualify for a loan, and obtaining a car loan also requires a high credit score—typically 750 or above. If you don’t have credit card debt, it’s challenging to build the kind of credit needed for loans. While applying for credit cards remains straightforward, getting approved has become more difficult. Some high-interest lenders will approve almost anyone, but they charge steep fees. Many people, after filing for bankruptcy, turn to these high-interest cards to rebuild their credit enough to buy a car or rent an apartment. In some cases, even job applications are affected by an individual’s credit score.
Having some manageable debt can be beneficial, as it helps establish your credit history. Many companies review credit scores to evaluate financial responsibility and habits. Maintaining a strong credit score through responsible credit card use is a great foundation for financial stability. Financial experts agree that establishing a healthy credit history benefits consumers in many ways.
Even today, the desire for top-of-the-line products persists. Consumers are still willing to stand in long lines to purchase concert tickets or the latest smartphones. People want the newest technology, clothing, and conveniences—boats, trailers, recreational vehicles, and oversized TVs, all of which can be purchased with a credit card.
Many employers now offer financial planning as an employee benefit, and this is something both young and older workers should take advantage of. Younger people can get a head start on managing credit card debt and leveraging it to their benefit, while older individuals may use financial planning services to repair damaged credit or build their scores. Banks offer financial planning services and have credit card options that may provide a better chance of approval for those who already have an account with the bank. It’s also important to compare interest rates to ensure you’re getting the most competitive terms available.
