The Dark Rise of Credit Cards

The rise of credit cards represent a ticket to a world of possibilities

With the rise of credit cards in today’s world, they are like the golden ticket to endless adventures and experiences. We’ve all seen those bank commercials that make it seem like with a simple swipe, you can unlock the world’s wonders. But there’s a side to credit cards that these ads conveniently leave out – debt.

The reality is, debt is on the rise, with the average American family now owing over $150,000. So, how can you enjoy the benefits of credit cards without falling into the debt trap? That’s what we’re diving into in this blog post.

The omnipresence of credit cards

It’s impossible to ignore the ubiquity of credit cards. Whether you’re at the grocery store, your favorite restaurant, a cozy coffee shop, the bustling airport, a fancy car dealership, or simply relaxing at home, credit cards are always there, ready to be used. They promise to make your dreams come true, whether that’s a much-needed vacation, a home renovation, attending a live concert of your favorite artist, or trying out that restaurant you’ve been curious about. Plus, you get all those tempting rewards, miles, bonus points, and cashback offers. It’s like they want you to feel like a hero with every swipe.

The long history behind credit cards

Credit cards might seem like a modern invention, but they have a surprisingly long history. Did you know that today there are around 200 million credit cardholders in the United States alone, with the average American having about four credit cards? That adds up to nearly a billion credit cards in use in the U.S.!

Credit cards, in some form, date back to the 1800s when they were known as credit coins and charge plates. Farmers used them to buy goods and settle the bill later with their crops. Fast forward to 1950, and the first credit card as we know it today was born, thanks to a dinner mishap.

The birth of modern credit cards: From cardboard to plastic

Picture this: a New York restaurant, 1950. A businessman named Frank McNamara dines out but forgets his wallet, leaving his wife to pay the bill. This incident led to the creation of the Diners Club Card, co-founded by McNamara and Ralph Schneider. They enlisted 27 partner restaurants and invited friends and family to participate, sparking a trend where diners could show a card and settle the bill at the end of the month. In just one year, Diners Club boasted an impressive amount of 42,000 members.

These early credit cards were quite different from today’s plastic versions. They were made of cardboard and functioned as charge cards, meaning there was no interest on spending. Members paid a modest annual fee of $3, while restaurants paid 7% on transactions. The plastic credit card, as we know it today, made its debut in 1959 when American Express issued the first one. Shortly after, Bank of America introduced the BankAmericard, which eventually became the Visa we know today.

The early challenges faced by early credit cards

Bank of America sent out thousands of their new credit cards, but there was a significant issue – these cards had no magnetic stripes or chips, making them susceptible to fraud. While this posed a challenge for security, it allowed Bank of America to accumulate an extensive database of customers, setting the perfect stage for the rise of credits card.

Credit Card Security

As the late 60s rolled around, credit card issuers faced a pressing concern: fraud protection. Forrest Perry, an IBM engineer was determined to find a solution. He tried various methods to attach magnetic stripes to credit cards, but nothing seemed to work. Frustrated, he decided to take a break and discuss the challenge with his wife. Her suggestion? Iron the stripe onto the card. Surprisingly, it worked!

By 1969, magnetic stripes had become a standard in the United States, and two years later, they were adopted as an international standard. The credit card craze was unstoppable.

The birth of major credit card brands

Bank of America, recognizing the rise of credit cards use and its potential, began licensing the credit card concept to other banks across the U.S. In the 1970s, major credit card brands emerged from this era. BankAmericard transformed into Visa, and a cooperative of Northeastern banks changed its name to Mastercard.


However, with great popularity came the need for regulations. In the 1970s, the first directives appeared, primarily aimed at protecting customers’ personal data and preventing discrimination.

Major technological advancements in credit cards

Fast forward a few decades, and several technological advancements reshaped the world of credit cards. In 1996, the integration of smart chips began, providing a much-needed security boost compared to easily copied magnetic stripes. Then, in 2010, the first contactless payment cards made their debut, followed by the launch of Apple Pay in 2014 and Google Pay in 2015.

The real business of credit cards

Now, you might view a credit card simply as a convenient payment method, but for others, it’s a thriving business, and a highly profitable one at that, so the rise of credit cards is not surprising. According to The Nilson Report, the three biggest U.S. credit card companies by purchase volume are JP Morgan Chase, American Express, and Citibank. These three giants alone generate over a staggering $1.5 trillion in transactions each year.

As you can see in the graph below, in 2022, Costco, FedEx, PepsiCo, Nike, and McDonald’s had lower gross profits than American Express, JP Morgan Chase, and CitiBank.

But here’s the kicker: banks, unlike traditional corporations that manufacture goods, generate substantial profits without producing anything tangible, yet their revenues are higher than most other global corporations. How do they pull it off? The answer lies in interest and fees, and the more you spend, the more they profit.

So, do banks simply sit back and watch the money roll in? Not quite. Allow us to introduce you to someone like Andrew Kahr, a credit card industry consultant whose job is to advise banks on how to maximize their profitability.

Minimum credit card payments

Back in the 1970s, most credit card issuers required a minimum payment of 5%. Today, you’re mostly charged a mere 1%. Andrew Kahr played a crucial role in leading this game-changing shift. In an interview with PBS Frontline, he shed light on the rationale behind the change:

“Having a lower minimum payment allows you to offer higher credit lines. This makes your card product more attractive to people, even if they don’t intend to use the whole line; they would rather have a higher one. And for the banks, the high-balance accounts will be much more profitable than the ones with lower balances.”

The downsides of the minimum payment

But there’s a catch. The convenience of lower minimum payments comes with downsides. As the title of a Forbes article succinctly puts it: “Credit Card Minimums: Perfectly Calibrated To Keep You In Debt.”

Smaller minimum payments might make your debt seem more manageable, but appearances can be deceiving. If you owe over half of your income, paying off that debt within 5 years can become nearly impossible. So, why should you avoid sticking to the minimum payment on your credit card bills? Well, let’s break it down.


  • Longer Repayment Time: When you only make the minimum payment, you’re in for the long haul. In fact, it can take a whopping 30 years to pay off just $10,000 at the slowest pace.
  • Higher Interest Costs: To add to the challenge, a larger outstanding balance often results in higher interest rates. It’s like a snowball effect where you end up paying more in interest than you initially borrowed.
  • Longer Repayment Time: When you only make the minimum payment, you’re in for the long haul. In fact, it can take a whopping 30 years to pay off just $10,000 at the slowest pace.

That’s why, we always emphasize the importance of paying more than the minimum required by your credit cards. While there are credit card options offering 0% interest for a set period, it’s crucial to double-check your agreement. These benefits can quickly disappear if you neglect to make payments.


The power of your credit score

Now, if you’re keen to learn how to optimize your credit and achieve the highest score possible, we’ve got you covered. Your FICO score is crucial because even a slight drop can lead to higher credit card interest rates. And here’s the kicker – your agreement rarely protects you from these rate hikes.

Generally, credit card companies can’t raise your interest rate during the first year of your account. After that, they’re required to provide a 45-day notice before introducing any changes. However, exceptions can exist.

For credit card issuers, consumer data is pure gold. Three major nationwide providers of consumer reports – Equifax, TransUnion, and Experian – compile comprehensive reports. These reports include information about your payment history, available credit lines, credit utilization, and various other data points. All of this data shapes your FICO credit score.

Credit scoring ranges

The credit scoring system may vary slightly, but it generally falls into the following ranges:

  • 800 to 850: Considered excellent.
  • 740 to 799: Very good.
  • 670 to 739: Good.
  • 580 to 669: Fair.
  • 370 to 579: Considered poor.

Understanding where you fall on this scale is essential for managing your credit effectively.

Credit Card Fees

Keeping an eye on your FICO score is essential, but it’s not the only thing you should watch out for. Credit card fees can sneak up on you, and there aren’t many regulations in place to protect you from overpaying.

An endless list of fees

Late fees, card processing fees, swipe fees, annual fees, application fees, over-limit fees – the list seems never-ending. While these fees serve as a significant income stream for banks, they can pose a real issue for us, the customers. Some agreements may present fees as low, with seemingly good interest rates, but the numbers often tell a different story.

Quietly, the debt is growing

Between 2018 and 2020, the Consumer Financial Protection Bureau (CFPB) estimated that with te rise of credit cards, Americans were shelling out approximately $120 billion per year in credit card interest and fees.

Currently, consumers tend to spend more due to 0% interest rates, lower minimum payments, and enticing cashback, miles, and points offered by credit card companies. However, it’s crucial to remain mindful of the growing debt and the fact that interest rates can easily rise. This situation can lead to dire consequences, including bankruptcy.

The menace of bankruptcy

Bankruptcy may seem distant, but in 2022 alone, over 370,000 cases of personal bankruptcy were filed nationwide in the United States. Lawyers often point to job loss, divorce, medical problems, and emergencies as the primary triggers for bankruptcy filings. Without these challenges, most American families can manage their debt.

Empowering yourself

Many label the credit card business as anti-consumer, but that doesn’t mean you have to play by the banks’ rules. This is why you’re here, educating yourself through Novarise. It’s about staying one step ahead of the banks and mastering their game.

A brighter future

So, while the rise of credit cards have undoubtedly changed the way we transact, their story is far from simple. Behind the scenes, it’s a world of innovation, profit, and financial intricacies that shape the plastic in your wallet.

You can use your credit cards without paying interest and maintain an excellent FICO score. Our videos will teach you how:

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