1. Analyze the evolution and importance of consumer credit as a relatively recent phenomenon
2. Identify how the credit card industry uses human emotions to stimulate demand, to reinforce economic class structure, and to increase consumer debt

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The end of cash

In many ways the markets of Ancient Greece were not that different from the shopping malls we have today. They were places where buyers and sellers could get together to exchange money for goods and services offered. The major difference between the ancient market and the market of today is that cash or coin money is comparatively scarce in today's transactions. Credit and debit cards have largely displaced cash in modern commerce.

Until the 20th century, lenders, banks, and governments issued various types of coins and paper bills. With the evolution of electronic money, a much vaster and more diverse network of institutions can create stores of wealth and methods of transferring funds.

Before credit

Prior to the Second World War (1939-1945), cash was the dominant form of money. Back then only the rich had access to credit accounts and it was mainly people who were already comfortably off who could borrow from banks. The average citizen had little personal debt: banks wouldn't loan to them and no one would give them serious credit. The economy was far different. The majority of people saved money until they could buy things outright - even houses! Appliances were purchased on layaway plans; you paid a bit each month and eventually you could actually take the item home. If someone really needed money, they might have to pawn or sell a prized family heirloom, borrow from another member of their family, or simply save up until they had enough. Those who were more desperate might have to take an unofficial loan from a "loan shark," who then might use illegal force on you if you didn't pay up.

Credit for everybody!

In 1928, partly under political pressure to reduce the devastating effects of loan sharking, a bank in New York City became the first to experiment with small consumer loans. The experiment proved successful, making both the bank and the consumers happy, and lending to consumers soon increased. Even though it was the Great Depression, during the 1930s consumer lending increased, as it proved to be one way of stimulating the economy. Access to loans for big-ticket items like houses and cars helped along the growth of these key industries and the economy overall. Working class and middle class people were soon borrowing for nearly everything, from stoves to stocks, and this trend only grew after World War II. In the 1950s and 60s everyone had a house (and a mortgage), two cars (and monthly payments on them), and perhaps a fridge or a television set on which they also made a small monthly payment.

But only in the 1970s did the real explosion of personal debt occur. The US government encouraged banks to develop new lending markets and in some cases very lax lending standards were legislated in order to allow economically disadvantaged consumers to get into the housing market. This was a decision that ultimately sowed the seeds of the worldwide housing crisis in 2008.