Credit Cards and the U.S. Middle Class

Paper Summary:

Over the past several decades, the American middle class has expanded by hundreds of thousands of households. Record numbers of families, headed by minorities, as well as female-headed households and single individuals have joined the middle class. The paper shows that with this growth and diversity throughout the class, the economy has witnessed record years in spending, especially through the use of credit. This increase in commitments of spending future income has resulted in a class-wide precarious financial position that has heightened their vulnerability to financial ruin. The paper examines the history of credit cards in the United States and shows how this form of payment is affecting the middle class in contemporary American society.

From the Paper:

"Now, many credit card companies actually avoid frugal types who use a credit card as a convenience and pay off balances every month. Instead, they statistically look for spenders who have an appetite for debt, are willing to make minimum monthly payments and tolerate high percentage rates and fees. They know that fees for late payments and fees for exceeding a credit limit increase profits. Sometimes an extra like credit protection, coupled with a late charge, is enough to put a customer over his credit limit, thereby giving companies another excuse to levy a charge (Gorham, On-line). The actual sub-prime market, which includes high loan-to-value ratios, includes mortgages, car loans and credit card debt, is "estimated at $200 billion dollars and growing by an estimated 50 percent a year" (Skelly 8)."

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