It was status and convenience in two breezy words: Charge it. But in these leaner times, shoppers are thinking twice before pulling out the plastic, even as analysts predict credit-card defaults could total more than $75 billion this year. On April 23, Barack Obama and his economic adviser Lawrence Summers met with credit-card executives to discuss how to control our addiction to plastic--and curb the controversial practices that encourage it.
Charge cards have been around since the 1920s, when service stations, department stores and hotel chains began offering them to automobile-loving consumers who didn't want to trek back to their hometown bank to get cash. But it wasn't until the postwar boom of the 1950s that credit cards really caught on. In 1950, Diners Club issued its first card--made of cardboard--for use in 27 restaurants in New York City. A year later, nearly 20,000 Americans carried it in their wallet. American Express, which had specialized in traveler's checks, created its card in 1958; the same year, Bank of America mailed its first 60,000 BankAmericards (now Visas) to residents of Fresno, Calif.--a harbinger of the aggressive marketing tactics used today.
Computerization spurred a boom in the 1970s and '80s, as did new methods of analyzing consumer data to unearth the most lucrative "revolvers," those who often carry high balances but are unlikely to default. Critics say contracts today, with their ever shifting terms and complex legalese, have helped customers get into more debt than they bargained for. Though Congress shelved earlier proposals for a credit-card holders' bill of rights, a new version was introduced in January, and this time, economic hardship coupled with populist outrage could translate into legislative change.