Credit Cards

Paper Summary:

In the first part of this paper, the writer discusses the rise in credit card use and looks at the reasons behind this increase. The writer then examines how the availability of easy credit caused a fundamental shift in American tastes. The writer also evaluates how these trends could affect a consumer's purchasing power, the credit industry, and even the national economy. The writer concludes that a combination of consumerism, economic need and the easy availability of credit have contributed to the revolving debt figures in the US. Further, the writer argues that as more people become knowledgeable about credit and are turning to debit cards and cash, creditors will have to devise new ways to encourage credit spending.

Outline:
Credit History
Credit Aftermath
Economic Effects
Works Cited

From the Paper:

"Previous research has suggested that only a small amount of credit-card holding households were responsible for the vast majority of credit card debt. Others have shown that as credit cards became more common forms of payment, average balances increased across the board. The fact that credit cards became more readily available in the early 1990s partly accounts for this phenomenon, and tends to support the latter conclusions. It is far more likely that all people are using credit cards more, rather than merely a fraction of American households."
"Bernthal et al attributes this increase in revolving debt to intense competition among lenders. There was therefore a strong incentive for lenders to extend loans to riskier households. In the 1980s, credit cards were seen as a status symbol, only acquired by those who had disposable income. By 1995, however, the average credit card holder had lower income and was more likely to be single. The average credit card holder was also more likely to rent rather than own their home, worked in a blue collar profession and often carried higher credit card balances."

Sample of Sources Used:

• Bernthal, Matthew et al. "Credit Cards as Lifestyle Facilitators." Journal of Consumer Research. June 2005, 32:1.
• de Graaf, John et al. Affluenza: The All Consuming Epidemic. New York: Berrett-Koehler Publishers, 2001.
• Kennickell, Arthur et al. "Recent changes in U, S. family finances: results from the 1998 Survey of Consumer Finances." Federal Reserve Bulletin, Board of Governors of the Federal Reserve System, January 2000, pp. 1-29.
• King, Amanda Swift. "Untangling the Effects of Credit Cards on Money Demand: Convenience Usage vs. Borrowing." Quarterly Journal of Business and Economics Winter 2004.Vol. 43, Iss. 1/2
• Sullivan, Teresa et al. The Fragile Middle Class: Americans in Debt. New Haven: Yale University Press.

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