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Credit Cards Financing the American Dream

Credit Cards Financing the American Dream



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Published by mwjackso
This is the 1st version of what became the Credit paper also on scribd.com - I would review this one and then review the final version. This one however still uses charge it and chicken in every pot which are my favorites.
This is the 1st version of what became the Credit paper also on scribd.com - I would review this one and then review the final version. This one however still uses charge it and chicken in every pot which are my favorites.

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Published by: mwjackso on Apr 04, 2009
Copyright:Traditional Copyright: All rights reserved


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Michael W. JacksonA02-92-6779Warren 11A7 December 1999Plastic:Puts a Car in Every Garage and a Chicken in Every Pot"I'll charge it!" is a common saying in today's credit based society. The ease bywhich consumers desire to fund the American Dream on a plastic card with the mentalityof "buy now, pay later." is a shocking realization displaying the integral nature of credit.This newfound reliance on credit, however, offers many troubling concerns surroundingthe society's overall susceptibility to economic instability comparable to that of the GreatDepression. Credit is now a marker of overall value in society. It is the means by whichone gains the ability to buy a house, a car, and even the food on the table. This creationof credit does not come without its drawbacks, as previously mentioned, the economy issusceptible to instability akin to the Great Depression and furthermore a person'sexistence and societal status are determined by their credit. The focus of this inquiry willdelve into the development of installment purchasing, the development of credit cardcompanies, and the integration of electronic fund transfer (EFT). The outcome of thissystem is a society in which people are pushed to over extend themselves in hopes thatthey can keep up with the Joneses.The installment plan or payment plan is not a new idea, however it wasrevolutionized in the early 1900's into a system which allowed many people the freedomto live their own American Dream. The installment system was developed in response tothe new idea of credit. Credit was the product of local merchants to entice customer 
loyalty. An example of this is when a family would be paid bi-monthly and the period of time between paychecks would cause the family to run low on funds producing a need for an ability to buy on one's word. Stores, in turn, to maintain their customers decided toextend a line of credit to the family until payday thereby creating the first forms of credit.Soon to follow was installment purchasing which was best captured in the durable goodsmarket. Durable goods are goods that are used in the home or marketplace such as a car,a stove, a washing machine, and an oven. These products all suffer the wear and tear of life and in turn need constant maintenance. These products were high-ticket items and asevery American desired to have the latest and most advanced products a need arose toallow people to pay in installments. The SearsRoebuck Company was the first to startthis system as it realized customers that could pay in payments shopped more frequentlythan customers that paid in full (Hendrickson 54). The next region influenced byinstallment buying was the automobile industry that desired to have every American owna vehicle. The Guaranty Plan was developed to assist the dealer in allocating inventoryand paying for the vehicles on the lot. The dealer was now floor-planning the vehiclesthat allowed Guaranty Bank, the holder of the title, to negotiate a deal between thecustomer who buy the car and their bank (Calder 135). The market for financing vehicleswas not a single business for long. General Motors developed its own division of installment buying with General Motors Acceptance Corporation. The development of installment purchasing wetted the pallet of Americans eager to have their own car, radio,and washer. This desire for the extravagant in life fueled an industry that is integral inthe development of credit. This field however only further removed the personal nature
of consumer and vendor to the ranks of impersonality and automation in the developmentof payment computers.Credit Card development was the second significant move in the history of establishing a credit system for Americans. The desire for a means to replace large bulkysums of money for the protection of a traveler is not an uncommon idea. In medievaltimes knights would use a special ring to mark a bill to protect themselves from thievesand this stamp could be taken to the knights castle and exchange for the value incurrency. The first credit card was the Diner's Club Card (Mandell 200). This cardfocused on the business traveler that would need to entertain guests at restaurants and inturn offered a way to not carry a wad of cash in one's back pocket. This development ledto the creation of a wide range of credit cards including the most common today, Visaand MasterCard. With the development of these financial devices a system of rating onesability to pay off a debt developed in the form of a credit rating. The credit cardcompanies offered Americans, already hooked on installment purchasing, the ability tonow purchase goods and services not based on actual cash but on the credit limit set on acard. This development pushed for the over-extension of Americans to purchase the products they desired and not worry about the bill as they could pay it in low monthly payments with minimal service charges and interest. Through this credit system a person's ability to pay was defined and then evaluated as a form of worthiness. This newfactor has led to the development of a society deeply rooted in credit in which a personwithout credit or poor credit has almost no chance to purchase anything of great value.The credit system developed from these cards allowed the banking system to develop ahighly skilled network of banks to allow for the extension of credit nation wide

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