The martial metaphor is apt . Bankers viewed card competition as zero-sum : neither consumers nor merchants were likely to maintain relationships with two banks . A gain for one bank was a loss for another . Bankers reasoned that the number of creditworthy households was limited . Consumers would , they expected , accept the first card that came their way . If that card was issued by a competitor , bankers feared , the customer might be lost forever .
Bankers convinced themselves that unsolicited mailings and intense mass promotion were indispensable . “ A basic formula for success in credit card banking consists largely of two basic ingredients ,” the American Bankers Association ( ABA ) reported after surveying card-issuing members in 1967 : “ 1 ) a bank must be consumer oriented ; and 2 ) it must be willing to implement its program with vigorous merchandising efforts .” The Federal Reserve offered a similar assessment . “ All of the banks that we have contacted … found it desirable in launching their credit card plans to send out cards unsolicited ,” a Fed official reported . By design , the strategy was seductive and coercive . Unsolicited mailing enticed “ charge conscious ” consumers , feeding their expectations of widely available credit . To satisfy these expectations , merchants had to join card plans .
Competition created an inescapable cycle , reinforced from above by trade groups and card networks and on the ground by local rivals . The ABA found that almost half ( 49 %) of banks admitted to entering the credit card field solely because of competition from other banks . “ It is becoming abundantly clear ,” wrote a Dallas banker , “ that many banks have gone into the credit card program as a defensive measure and without first doing their homework .”
Fear brought on recklessness . The same ABA survey found that only 54 % of banks checked consumers ’ credit before mailing unsolicited cards . Congress later heard that closer to 80 % of banks failed to perform adequate credit checks . As the number of card-issuing banks expanded , so did the competition . Gasoline companies and department stores mounted aggressive campaigns as well . By 1970 , one journalist estimated , firms had mailed over 100 million unsolicited cards . With so many cards in the mail , bankers discovered , “ there ’ s no good solution to the fraud problem .” Stories of cards going to children , pets and the deceased — paired with panicked accounts of card theft and fraud — multiplied , year after year , undermining the credibility of the industry as a whole .
Life magazine columnist Paul O ’ Neil perhaps best captured the mood in his March 1970 article , “ A Little Gift from Your Friendly Banker .” Banks undertook card distribution , O ’ Neil wrote , “ in many cases , with a kind of eager innocence which none of them would have countenanced for a moment in firms with which they did business .” O ’ Neil went further . “ A few of them , caught up in the excitement of the unfamiliar chase , seem to have become as blithely careless of consequences as a drunken sailor shooting craps in a Mexican whorehouse on New Year ’ s Eve .” The article explored the litany of problems caused by unsolicited mailing : fraud , fears of impersonal technology , inflation , unsteady gender dynamics and threats to the safety and soundness of irresponsible card-issuing banks , all of which spurred new regulatory efforts .
In the final analysis , the bank card networks embodied a paradox . Bankers designed their networks to embed nationwide card plans within the local ties between merchants , consumers and the card-issuing or agent bank . In the 1960s , place still mattered . BankAmericard and Master Charge linked circumscribed markets , they did not overlay them . A Marine Midland Charge Plan , bankers believed , was different than a Wells Fargo Master Charge . Credit cards were not commodities . Instead , they were grounded in each bank ’ s market area , inextricably linked to the physical edifice of the bank and its branches , where consumers and merchants would come to make deposits and engage other banking services .
But unsolicited mailing set in motion several disembedding forces . It divorced the process of receiving credit from the experience of consumption ; to access credit , consumers no longer had to endure an interview with a credit manager , “ something ,” characterized in Bankers Monthly as “ akin to a prisoner-of-war interrogation .” Credit came in the mail . But while bankers hoped cards would still be coupled with their branch offices , and through them with the social relationships that undergirded their role as responsible guardians of credit , consumers experienced cards differently . Many consumers were unknown to the banks who issued them cards . When bankers bought lists of likely credit risks to reach beyond their existing customer base , they eliminated the social connection in the process . For some consumers , this meant they were less careful with their spending and more likely to default . Other consumers were outraged that credit invaded domestic space . Over the long term , it meant that most consumers associated their credit with the network , BankAmericard and Master Charge , rather than the issuing bank . Credit cards became commodities , divorced from local markets , and as such tools to break down financial localism .
Sean H . Vanatta is a senior lecturer in economic and social history at the University of Glasgow and a senior fellow at the Wharton Initiative on Financial Policy and Regulation at the University of Pennsylvania . He is the author of Plastic Capitalism : Banks , Credit Cards , and the End of Financial Control ( Yale University Press ), from which this article has been adapted .
22 FINANCIAL HISTORY | Summer 2024 | www . MoAF . org