Magazine article New Internationalist

Plastic Smiles

Magazine article New Internationalist

Plastic Smiles

Article excerpt

Credit cards for a specific industry or store have been in operation in the US since 1914, offered as marketing tools by lenders to encourage loyalty to their particular products or outlets. The first universal credit card - Diners Club, which came onto the US market in 1949 - was primarily a travel and entertainment card used by on-the-road salespeople to purchase goods and services from a broad range of providers (later supplanted by American Express). The card ushered in credit as a profitable service in its own right, through which consumers were offered purchasing power and retailers were offered customers so long as each paid a fee for the service. But the concept had a conundrum: consumers would not sign up unless a card was widely accepted by merchants, and merchants would not sign up until they saw a demand for a card. Consequently, banks undertook a mass mail-out of unsolicited credit cards in the late 1960s, which successfully placed credit cards in the wallets of millions.1 This tactic - offering unsolicited credit to consumers - is still practised successfully today around the world, peaking in the US in 1998 with an incredible 3.5 billion direct mail solicitations.2

The fans of credit cards say that it has greatly enhanced the quality of life for all classes, but particularly the economically disadvantaged. Unlike the travel and entertainment cards that are used by the affluent, for banks to achieve a large cardholder base they have had to accept customers with a lower economic profile and a higher default rate. …

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