Consumer Credit

credit card

credit card, device used to obtain consumer credit at the time of purchasing an article or service. Credit cards may be issued by a business, such as a department store or an oil company, to make it easier for consumers to buy their products. Alternatively credit cards may be issued by third parties, such as a bank or a financial services company, and used by consumers to purchase goods and services from other companies. There are two types of cards—credit cards and charge cards. Credit cards such as Visa and MasterCard allow the consumer to pay a monthly minimum on their purchases with an interest charge on the unpaid balance. Charge cards, such as some American Express cards, require the consumer to pay for all purchases at the end of the billing period. Consumers may also use bank cards to obtain short-term personal loans (including "cash advances" through automated teller machines). Credit card issuers receive revenue from fees paid by stores that accept their cards and by consumers that use the cards, and from interest charged consumers on unpaid balances.

Diners Club became the first credit card company in 1950, when it issued a card allowing members to charge meals at 27 New York City restaurants. In 1958, Bank of America issued the BankAmericard (now Visa), the first bank credit card. In 1965, only 5 million cards were in circulation; by 1996, U.S. consumers had nearly 1.4 billion cards, which they used to charge $991 billion in goods annually.

The growth of credit cards has had an enormous impact on the economy—changing buying habits by making it much easier for consumers to finance purchases and by lowering savings rates (because consumers do not need to save money for larger purchases). Oil companies, car makers, and retailers have also used the cards to market their goods and services, using credit as a way of encouraging consumers to buy. Concern has been voiced over widespread distribution of bank credit cards to consumers who may not be able to pay their bills; costly losses and theft of cards; inaccurate (and damaging) credit records; high interest rates on unpaid balances; and excessive encouragement of consumer debt that has cut savings in the United States. Legislation enacted in 2009 (and effective in 2010) imposed restrictions on credit card companies, including restricting how they could raise interest rates and placing limits on the issuing of cards to persons under 21 years of age, and attempted to make credit card bills clearer and more informative.

Technology advances have facilitated the use of credit cards. Merchants are now connected to banks by modem, so purchases are approved rapidly; on-line shopping on the Internet is possible with credit card payment. Credit card companies are also experimenting with smart cards that would act like a small computer, storing account and other information necessary for its use. An alternative to credit cards is the debit card, which is used to deduct the price of goods and service directly from customers' bank balances.

The Columbia Encyclopedia, 6th ed. Copyright© 2014, The Columbia University Press.

Selected full-text books and articles on this topic

It's in the Cards: Consumer Credit and the American Experience
Lloyd Klein.
Praeger Publishers, 1999
The Decline of Thrift in America: Our Cultural Shift from Saving to Spending
David M. Tucker.
Praeger Publishers, 1991
Financing the American Dream: A Cultural History of Consumer Credit
Lendol Calder.
Princeton University Press, 1999
Women and Credit: Researching the Past, Refiguring the Future
Beverly Lemire; Ruth Pearson; Gail Campbell.
Berg, 2001
The Effects of Credit Attitude and Socioeconomic Factors on Credit Card and Installment Debt
Chien, Yi-Wen; Devaney, Sharon A.
The Journal of Consumer Affairs, Vol. 35, No. 1, Summer 2001
PEER-REVIEWED PERIODICAL
Peer-reviewed publications on Questia are publications containing articles which were subject to evaluation for accuracy and substance by professional peers of the article's author(s).
Effects of Low Income Families' Ability and Willingness to Use Consumer Credit on Subsequent Outstanding Credit Balances
Zhu, Lillian Y.; Meeks, Carol B.
The Journal of Consumer Affairs, Vol. 28, No. 2, Winter 1994
PEER-REVIEWED PERIODICAL
Peer-reviewed publications on Questia are publications containing articles which were subject to evaluation for accuracy and substance by professional peers of the article's author(s).
Impact of Consumer Installment Debt on Food Expenditures
Kirby, Raymond; Capps, Oral, Jr.
The Journal of Consumer Affairs, Vol. 28, No. 1, Summer 1994
PEER-REVIEWED PERIODICAL
Peer-reviewed publications on Questia are publications containing articles which were subject to evaluation for accuracy and substance by professional peers of the article's author(s).
Federal Reserve Policy during the Great Depression: The Impact of Interwar Attitudes regarding Consumption and Consumer Credit
Kubik, Paul J.
Journal of Economic Issues, Vol. 30, No. 3, September 1996
Corporate Power and the Evolution of Consumer Credit
Watkins, John P.
Journal of Economic Issues, Vol. 34, No. 4, December 2000
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