The Credit Card- Growing Old Disgracefully?
By Nick Funnell
Friday 13th April 2007
The credit card celebrated its 40 th birthday in the UK last year, but doesn’t seem content with a quiet life as middle age approaches. Just like its older cousin in the US (where Diners Club became the world’s first general purpose charge card in the early 1950s), the UK Credit Card seems to get increasingly active and vigorous with age. Indeed, the UK has long since overtaken the US in terms of card penetration, with 75m active cards over a population of just 60m. But just how did it all begin?
The Deferential World BC (Before Credit)
It’s fair to say that banking up to the 1960s was a rather cosy, middle class affair. Only half the population had bank accounts at all, and credit (in the form of a loan) could only be obtained via lengthy interviews with the Bank Manager. I well recall my Uncle regaling the family each Christmas with his story of how, as a young man, he attempted to open an account at his local branch with £5 won at his firm’s annual prizegiving. He was shown the door with the kind of haughty disdain usually reserved for vagrants demanding money for drink.
In retrospect, this Monty Python, bowler-hat-and-pinstripe world could never have survived the explosion of mass consumerism that would engulf the country over the coming years, but at the time it must have seemed impregnable.
Barclaycard – An Uneasy Birth
In the early summer of 1966, while the thoughts of much of the country were turned to the victorious World Cup campaign, a minor revolution was being sparked from a converted shoe and boot factory in Northampton. It was from here that the UK’s first credit card system- bought by Barclays Bank from Bank America in California- was set up and run. The Barclaycard was born.
There was no application process or even an advertising campaign to deliver this new infant. Barclays had trawled through their records to find around a million of their most credit-worthy customers, and simply them sent them the cards unsolicited. Some reacted badly, slamming the newfangled ‘bits of plastic’ down angrily on their Bank Manager’s desk. In addition retailers, that vital third link in the credit chain, were often slow on the uptake. Tales abound of customers having to wait to make their purchases while store manager, the only one entrusted to administer the precious credit card system, came back from lunch- or even holiday.
Adolescence and Rapid Growth
Despite these early teething problems, the credit card was clearly an idea whose time had come, take-up increasing steadily over the next few years. It didn’t take long for Barclay’s UK monopoly to be broken- rivals Midland, Lloyds, Natwest and the Royal Bank of Scotland teamed up in 1972 to offer Access, featuring one of the most successful taglines in UK advertising history- ‘your flexible friend’. Throughout to 1970s and 80s, the Credit Card became a standard item of middle-class consumer respectability.
However, perhaps the real revolution had come back in 1967, when Harold Wilson’s Labour government allowed cards to offer extended credit for the first time, rather than requiring payment in full at the end of each month. Passing almost without comment, this measure acted as a steroid injection to the fledgling industry. Ironically, the media at the time were obsessed with Wilson’s comments about the ‘pound in your pocket’ not losing value as a result of devaluation, just as the cashless society was coming into being.
The 1990s: A Fashionable Item- or Mutton Dressed as Lamb?
The sheer number of Credit Cards available in the UK has exploded since the early 1990s- there are now more than 1300 of them. In order to differentiate themselves in such an overcrowded market, many cards now dress themselves up in fashion and ‘lifestyle’ packages rather than rely on the more staid charms of APR rates and balance transfer deals. The ‘affinity’ card market came into being.
Of course, much of this packaging is designed to appeal to younger credit users than in the past. Like some ageing lothario out clubbing on the weekend, sober colours are now often tossed aside in favour of funky graphics, fashion brand logos and football club emblems. Student credit cards now form a category all to themselves. Fresher’s week fairs at most universities are now awash with stands at which credit card providers tout their wares to those contemplating living for the next three or more years on a student loan. Though the industry usually portrays this as a natural extension of the democratisation of credit, cynics would call it marketing to the vulnerable.
When the Party’s Over
Of course, with all this loose living can come a heavy downside. We can all laugh at someone (maybe ourselves) whose credit card use can sometimes get a little out of hand- but occasionally the consequences can be tragic.
The steady drip-feed of individual horror stories in the media should serve as a warning to us all- stories such as that of Richard Cullen, an unassuming mechanic from Trowbridge who killed himself in 2005 after the £4,000 he borrowed to pay for his wife’s medical treatment spiralled into debts totalling £130,000 over a myriad of cards in just six years. Adding fuel to this fire, now from the U.S. comes Maxed Out , a newly released independent documentary film which looks set to become this year’s Fahrenheit 9/11. The film’s subtitle, Hard Times, Easy Credit and the Era of Predatory Lenders, pretty much says it all. Viewers can look forward to two hours of tears, repossessions, family breakdowns and suicides caused by the abnormally profitable credit companies and the brash young employees of the debt recovery firms to whom they farm out the dirty work. Maybe not the most balanced of viewpoints, but a potent and headline-grabbing one nonetheless.
One thing seems certain- this forty-year-old will not be slowing down and taking thinks easy any time soon. Total UK credit card debt has now grown to £55bn (Feb 2007), compared with just £14bn ten years ago. Over one billion items of ‘junk’ mail for new credit card offers is currently being sent out every year. Only time will tell just how long this lust for life can continue.
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