The CARD Act in Perspective: Ongoing Efforts to Find Balance in Credit Card Regulation

The American credit card market lies at a special nexus between financial institutions and middle-America. In the first centuries of the American experiment, state governments aggressively policed consumer credit with interest rate limits that tended to preclude profitable unsecured lending to middle class consumers. These aggressive limits were buttressed by the widely held view that excessive interest rates were an immoral form of usury. But, in the early twentieth century, the social acceptance of consumer borrowing began to shift.

These cultural, and eventually legal, changes were perhaps best illustrated by the credit card market. As early as 1914, retailers issued charge cards specific to their stores to encourage loyalty among their best customers. Similarly, airlines and gas stations began using charge cards in the 1930s. Diner’s Club issued the first “third-party universal” card, which has become the contemporary norm, in 1950.

Throughout the 1950s and 1960s, credit cards helped spur an unprecedented growth in the volume of consumer credit.