Throughout history, Americans have worked hard and saved their money to achieve the
American dream. In spite of these core values, something significant happened to the American culture
that effected the financial position of half of American consumers. Charles R. Geisst, author of
Collateral Damaged explains that, “Since banks and finance companies developed and began to provide
the necessary means or credit to achieve the American dream, debt has been the way of attaining it”
(Geisst 207). The invention of the credit card enabled Americans to live beyond their means, but at a
high cost. The termination of the usury laws meant the banking industry would no longer have a limit on
the amount of interest they could charge for use of their credit cards. Without federal usury laws in place
to protect the consumer, credit card companies launched and were essentially given a license to steal,
inevitably drowning American consumers in debt.
Twenty-five years ago, the banking industry successfully eliminated a critical restriction: the limit on the interest rate a lender can charge a borrower (“Do You Know What You”). These restrictions were known as usury laws. These laws were in effect for centuries prior to the 20th century (Geisst 2). Usury laws were established to protect the borrower from predatory behavior (Geisst 3). “Prior to the 20th century, charging interest on loans was considered heresy by the church. Anyone caught charging excessive interest was excommunicated and often punished” (Geisst 3). Banks fought for restrictions to be lifted arguing the usury laws were standing in the way of progress (“Do You Know What You”). Banks won the battle over consumers. The deregulation of the usury laws occurred in the early 1980’s and created a whole new invention, the unsecured credit card. Past generations believed deeply in hard work, saving money and living within ones means. They lived by the phrase, a penny saved is a penny earned. In order to lure the public into using unsecured credit cards without regrets, the banking industry needed a marketing plan intended to change those core values of Americans. The bankers yearned for future profits from interest charges. Politicians were involved as well, not necessarily for the card usage, but they needed a boost in consumer consumption to fuel the economy. In order to absolve these thoughts Dr. Robert Manning, a professor at the Rochester Institute of Technology points out, “Banks had a multi-billion dollar mass marketing strategy that led to the Nike ‘Just Do It’ consumption. The effort was to get the new generation to reject those old school values” (Telvick). The banking industry also needed to change the stigma to using charge cards, naming them credit cards. When consumers hear the word credit, they have a tendency to think free money. When they hear the word debt, they think of money they owe. Therefore, it is no coincidence that these cards are named, credit cards. The people accepted this change in beliefs. Consumers adapted to the buy now pay later routine. The banking industry and some political figures were successful in altering American views. College students were no longer embracing the core values and traditions of past generations. In fact, due to the intense marketing of credit card companies at college’s campuses and easily accessible credit lines, students now had a level of acceptance to having high credit card debt (Manning 4). The late 1980’s, and beyond produced young adults that were enrolled in college were optimistic about their potential incomes upon graduating (Manning 5). This made the transition in American core values even easier for the banking industry, tantalizing consumers with the buy now, pay later concept. “The most surprising phenomenon to arise from democratization of the credit card was the amount of credit made available to the poor” (Geisst 105)....