I picked it up on a whim. As I was leaving a church sale I spied a pile of books marked free, so I looked at the paperback on top of the pile, thumbed through it and decided to give it a read. It was a book published in early 1960s about the growing consumer debt industry in the US entitled Buy Now, Pay Later. It was written by a researcher, not an economist and the cover promised to explain the practices and pitfalls of easy credit, show how it works and what it costs you.
How could I resist? The worst thing that could happen was I would read it and learn nothing. Intrigued, I took it home and gave it a quick read. A few things stood out in the book that gave me pause to think. Describing the invention and rise of credit cards, a good history of the first credit card that really took off encompassed the first chapter. This card was, by the way, the Diners Club card. Used at first in restaurants, it soon ballooned to allow the purchase of everyday sundry goods. Gasoline companies and department stores followed suit with their credit cards; pretty soon wallets and purses in America carried about a dozen (or more) cards that allowed immediate gratification while shopping. Financial institutions also took note and pretty soon Master Card, Visa and others took off. Credit reporting bureaus also came into being and collected data on those that paid their bills and those that didn't.
Before credit cards, loans were pretty much affairs between a bank and their customers to buy a house or a car. King cash ruled until the rise of plastic money.
You already know what the book concludes: Interest rates gouge borrowers and undisciplined people make purchases they know they can't pay off by the end of the month, so they go on revolving credit and end up paying two or three times the original price. But it also gives credit a fair shake by explaining how it has allowed people to buy things they could never afford up-front because saving for them was often unrealistic. It also explains the difference in how banks compute interest depending on whether it's on your savings account or if they're the ones doing the lending. Simply put, if you borrow money at 4% or you have it in the bank earning 4%, you get short-sheeted when the bank is paying you because simple interest is not always simple.
I find it interesting to note that the Code of Hammurabi as chiseled in stone forbade the exploitation of debtors by the rich and powerful. Since then, things have changed. Usury is part and parcel of the financial market, including both reasonable and exorbitant interest rates. Even the Bible had the money changers sitting at the tables. But the biggest pearl of wisdom the book dropped on me was how credit separated the haves and the have-nots further apart than they ever were.
Alfred Bloomingdale, the President of the (then) powerful Diners Club said Twenty years from now there will be only two classes of people: Those with credit cards and those who can't get them. Then he added the words that predicted what sadly has become a reality:
Then there's going to be one hell of a split in society.
And there is, to be sure. We can debate all day long why it is, we can banter back and forth about racism, sexism, xenophobia, politics and such, but it all comes back to the almighty dollar.
America is certainly divided and a large part of that divide comes back to money. But there's good news now:
We can blame it on credit cards!
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