History

• Companies had been using charge cards for years before the first commonly accepted card in 1951 was produced by the Diner's Club. Early charge cards were metallic plates that listed a customer's account number, which a store representative would verify and add the purchase to his tab. Also, they were mostly limited to specific businesses. The Diner's Club could be used at several establishments around the New York area, according to a April 2009 article in Time magazine. Bank of America and American Express became major players in the credit card market by the late 1950s.
  
  

Importance

• The credit card explosion explains some of the problems that U.S. families face in 2011 and why the economy changed during the 20th century. Credit cards allow consumers to make big purchases immediately, such as cars, without needing the capital to buy it. While people had been able to buy things without cash in hand, credit cards sped up this process. The easy access to credit also puts families in debt, because credit cards are unsecured lines, so creditors can charge interest rates in excess of 18 percent. As of 2011, consumers owed $794 billion to credit card companies.
  
  

The Next Step in Credit Card

• The advancement in computers helped credit card issuers figure out who the best customers were -- borrowers who carried balances every month. However, the boom in credit cards during the 1980s was also assisted by the elimination of laws outlawing usury in the Supreme Court case of Marquette National Bank of Minneapolis v. First of Omaha Service Corp in 1978. The Supreme Court ruled that banks could charge interest rates allowed by the states in which they operated from. Thus a bank in a state without a usury limit could charge a higher interest rate than the usury limit of another state. This effectively uncapped credit card rates and concentrated credit card issuers in a few states without a usury law, such as Delaware.
  
  

The Credit Card Accountability Act

• The consumer credit industry did mostly whatever it wanted during the 1980s through the '00s, such as raising rates for consumers missing a payment by as little as one day and switching due dates to get customers to miss a bill. Congress passed the Credit Card Accountability Act in 2009 to put restrictions on common credit card practices which promoted predatory lending in the industry. In 2011, for instance, creditors cannot give accounts to people under 21 unless they can prove an income.