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The Boldest Experiment In Capitalism: Credit Cards

“When I was a little girl, there were real prices and mom prices. Real prices got you shiny, sparkly things that lasted three weeks, and mom prices got you brown things that lasted forever. But when I looked into the shop windows, I saw another world. A dreamy world full of perfect things. A world where grown-up girls got what they wanted. They didn't even need money, they had magic cards”.

Rebecca Bloomwood, Confessions of a Shopaholic

These so-called magic cards or credit cards are liberating for people, especially the middle class, who associate them with luxury, freedom, and flamboyant spending. The Bank of America created the first-ever credit card in 1958. For most of history, banks sanctioned loans based on a person's character, reputation and the collateral received. Imagine how it must be back then, receiving a courier from Bank of America with a plastic card that tells you it has a $500 credit and you can spend it however you want. In the twenty-first century, credit cards have become a vital part of life as they determine your credit score which serves as your financial identity.

If you want to get a loan sanctioned, whether it's a student loan, a mortgage loan, or an automobile loan, you must have a good credit score to determine your creditworthiness. This three-digit FICO score ranges from 300 to 850 and shows the bankers your previous history of handling loans, the amount of existing debt, and the time taken to repay them. Any score between 800 to 850 is considered exceptional by bankers. However, loans are given at scores such as mid 600s to low 700s as well. Consequently, low scores decrease the possibility of you getting your loan sanctioned or may result in a higher rate of interest.

Transactors Vs. Revolvers

In every friend group, there are two kinds of people, the one who does their work before the deadline and the other who slacks off and procrastinates. The responsible ones here are the ‘transactors’ who pay their debt in full every month and those who slack off paying are the ‘revolvers’. Credit card companies make no money on transactors and famously call them ‘deadbeat’. The revolvers aren't bothered by the revolving credit and hence, are favourites of credit card companies as they pay compounded interest on the amount borrowed and slack off until they end up paying more than they borrowed. (Source: MogoFinance) The credit card statement is designed in a way that directly appeals to the psychology of the credit card user. ‘Anchoring bias’ is the psychological phenomenon of biases in people’s judgement against arbitrary numbers.

Hence the minimum amount is purposely mentioned in the credit card statement so that the customers who pay their credit partially can underestimate the amount they can afford to spare and make smaller payments. Consequently, this further increases interest rates and the duration of credit card debt. The increased usage of credit cards has led to increased wealth disparity between the rich and the poor. Around 60% of the US population owns credit cards with an average of 4 per person. Presently, there are over 365 million open credit cards in the USA alone which generates trillions of dollars in revenue for credit card companies.

Credit cards and Compulsive Buying Disorder

“Security can mean different things to different people. For some, it is going to a party wearing the right shoes. This might leave you feeling secure for an evening, but have a crippling effect later in your life.”

Rebecca Bloomwood, Confessions of a Shopaholic

When one feels despondent, they usually find solace in their hobbies and treat themselves. However, resorting to shopping or credit card addiction isn't a ‘hobby’ or ‘self-care’ activity; it is a behavioural addiction and compulsive buying disorder, often overlooked or misunderstood by society. Over 20 million people in the United States are affected by credit card addiction. A person suffering from this condition deals with negative emotions and events in their life by going on a shopping spree and excessively using credit cards to give themselves a dopamine boost despite the negative consequences they face later. Moreover, a study conducted in the USA by Steven Schlosser in 1994 involving 46 people with compulsive buying disorder showed that when the participants were shopping they felt good (44%), liked to have something new (52%), preferred being distracted from their problems (24%) and gained a sense of power (17%).

Credit card addiction has four phases: anticipation, preparation, shopping, and spending. When compulsive buyers go through negative emotions like sadness, anger, or anxiety, they think of relieving themselves through spending. They go on shopping sprees and use their credit cards excessively to support these impulse purchases. This is followed up by feelings of guilt and sadness that make people shop more and create a vicious debt cycle that severely affects their mental health, relationships, career, and financial stability.

These people who suffer from credit card addiction not only rely heavily on their plastics but also suffer from an inability to control their impulse purchases, carry balances on multiple credit cards, hide their monthly credit card statements, and remain in denial. Some ways to deal with credit card addiction are to start using debit cards, closing your credit card accounts, developing a habit of budgeting, unsubscribing from retail emails, seeking help and support from your peers, and most importantly, availing cognitive-behavioural therapy. As Gary Herman, President of Consolidated Credit, a Canadian non-profit credit counselling organisation, rightly said, “Paying off debt in full every month is the smartest way you can use credit cards”. When it comes to credit, it is better to be boring and pay the debt in full to avoid tanking interest rates. Understanding that credit companies are working against us, not for us helps people win the credit battle. After all, credit interest is a devilish thing, possibly why Dante reserved a special place in the seventh circle of hell for usury.

Anuranjana Karan
High School Student


Bertaut, C. C., & Haliassos, M. (2006). Credit cards: facts and theories. The economics of consumer credit, 181-237. Brobeck, S. (2000). Credit Card Nation: The Consequences of America's Addiction to Credit.

Advancing the Consumer Interest: ACI, 12(2), 31. How Behavioral Economics Could Help Reduce Credit Card Delinquency. (2018, July 26). Harvard Business Review. Retrieved October 16, 2022, from Frankel, R. S. (2021, July 27). When Were Credit Cards Invented: The History of Credit Cards. Forbes Advisor. Retrieved October 16, 2022, from Credited Editorial. (2021, December 31).

The Ultimate List of Credit Card Statistics (2022). Credited. Retrieved October 16, 2022, from Murali, V., Ray, R., & Shaffiullha, M. (2012). Shopping addiction. Advances in Psychiatric Treatment, 18(4), 263-269. doi:10.1192/apt.bp.109.007880 Research.

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