Credit cards as a root cause of personal debt

Credit cards were devised in the 1920s as a response to an emerging class of consumers who traveled in their automobiles but did not have access to their bank accounts outside of their home town. What was at one point a consumer convenience has led to an environment in which consumer debt is at all time highs, the average American family has eight credit cards and credit cards contribute to high personal bankruptcy rates (Stephey, 2009).

Credit cards grew to prominence is the 1950s with the launch of Diner's Club and later the American Express credit cards. In the 1960s, credit card marketing became increasingly aggressive, lead by Bank of America (Stephey, 2009). Growth in the industry was significant and prolonged. In 1980, fifty years after Diner's Club was launched, a study on credit cards found no evidence that they had become saturated despite annual growth rates in usage of 12.2% to that point (Garcia, 1980).

Today, with eight cards per household and debt totaling $888.1 billion dollars (Federal Reserve Bank, 2009) or approximately $2,900 for every American, credit cards have become a drain on our ability to consume efficiently. Such revolving debt has the highest interest rates, money that is not put to efficient use in the economy. Moreover, credit card debt has fueled resulted in low savings rates that have contributed to the trade deficit, thus contributing to a wealth transfer out of the United States.

In fifty years, the heavy spending that credit cards facilitate will be viewed negatively, but credit cards themselves will still exist and most likely without stigma. The use of credit cards will be even more widespread, as fewer purchases will be done on site. Credit cards may be scorned by individuals who have acquired too much debt, but on the whole their benefits to society will not be overlooked.