Chapter 4: Credit Cards

Right now there are more than one billion cards in consumer’s wallets. That means the average household has more than nine cards, a figure that has more than doubled over the past five years. In fact, over 80 percent of Americans have at least one card. It has become the sad reality that credit cards can seem more valuable than cash. Small wonder that Visa and MasterCard are used for over $1.5 trillion in purchases a year.

Most other borrowing requires repayment in a fixed manner over a specific term. Quite the opposite is true with credit cards. Statistics show that only 37 percent of major credit card holders pay their balance in full by the due date. If not, issuers can tack on interest charges usually ranging from 10 to 23 percent for almost two-thirds of all accounts that carry a balance at the end of the month. It’s a sad day for the companies when their customers do pay off their balance. To avoid this as long as possible, even the minimum payments have now been reduced by many companies to as low as two percent per month.

“The card was never intended to encourage

people to spend beyond their means.”

Joe Titus – First Credit Manager of The Diners Club (1959)

A better quote came from a past Visa USA President, Dee Hock: “People don’t suddenly get dumb because we give them a piece of plastic.” Well, Mr. Hock – maybe not permanently dumb, but sometimes…