It was only later with, I think, Bank of America in CA (maybe not BOA, but it WAS an issuer in CA)in the early 70s that the business model of unsecured installment credit was used. The breakthrough was the guy who brainstormed it figured out a way to reduce his default risk by soliciting only those people who would feel compelled by their character/background to repay the cards even though the debt was unsecured.

So, yes, in the 60s, credit cards were not considered installment credit. the terms required full payment each month.

classic excuse

I also think that we Americans aren’t as clueless as we get “credit” for being — even as we spend and struggle with the debt, if we are at all self-reflective we do realize what we need to do. And how much stuff do we need, really?

And besides — it’s only right that Americans should behave responsibly and spend as they go (or, as the video points out, only spending on credit what they can comfortably pay back out of the un-marked portion of their discretionary funds). And it serves corporate greed right if they are struggling because us consumers are starting to reject the business model they’ve decided is right for us.

As a fan of GRS, I am dying to know if you’ve read that NY Times article about consumer debt from a few days ago “Economy Fitful, Americans Start to Pay as They Go” ). Mostly, I think it’s interesting to see how “keeping up with the Joneses” is (or might be) changing because people are paying more attention to their own circumstances more closely. And isn’t that always how personal change works?

-Mei

It seems that these days, the messages we (or rather, advertisers), give kids are completely the opposite: buy now, pay later, and don’t worry about how. If you want that great new cell phone or i-pod, you deserve it, whether you can afford it or not.

IMHO, these types of videos/workshops/trainings should be implemented in our schools from junior high school and up (if not sooner?). I’ve read many, many posts from people who ask why children don’t get this information in schools (maybe the CC companies lobby against this sort of education). I guess if the schools aren’t going to step up, it’s up to parents (the ones who aren’t already neck-deep in debt themselves. . . )

Great post!

In my early career I worked for a major bank. It’s interesting to note that the “C’s” of credit are still taught; however, “character” is not one of them anymore…

Think of the classic film, “It’s a Wonderful Life:” George Bailey was the local banker and he loaned money to the town-folk based primarily on character while capacity was a secondary concern. The relationship was built on trust — not greed…

Part of the problem with banking in the 21st century is the pure size of it and the quest to satisfy “the bottom line.” In today’s banking environment, character can not be quantified; greed is given more room; and the “small guy” with strong “character” but little “capacity” is completely overlooked. Something tells me the “credit crunch” would not exist if banks operated more like George Bailey…

The small banks are all but history. Personally, I use the smallest bank in my city. It only has three branches. I don’t see them often but they know my name…

Examples of good credit are:

education loans = higher earning power (usually)

house loan = appreciation (usually) and adds to your net worth

small business loans = higher rate of return (usually) – if you borrow at say 7% to start a business and make a 15-20% return, that’s good debt, and adds to your net worth.

Bad credit — auto loans. We all know how fast a car depreciates when you drive it off the lot, or if you wanted to sell the car just a few years later — your net worth takes a nose dive – decreases – when you buy a new car.

Bad credit — charge card – if you use it and pay it off, they are convenient, otherwise, they will decrease your net worth w/the interest charges and fees, as will department store charges, etc.

Thanks for finding this film – it was fascinating!