Credit Cards: The Business Of Enslaving People.

Let’s talk about that unassuming piece of plastic in your wallet—the credit card. It’s lightweight, fits in your pocket, and can wreak absolute havoc on your finances if you’re not careful. Credit cards are not just payment methods; they’re one of the cleverest (and most subtle) ways that banks and financial giants keep people indebted. How do they do it? By tapping right into human psychology.

From the start, banks figured out that lending cash at high-interest rates and making debt so easy to access was the perfect formula for profit. As soon as we swipe, we experience the thrill of buying now with the invisible weight of paying later—a “buy now, pay later” habit banks love because it disconnects the pleasure of buying from the pain of paying. And because credit cards were made so accessible, they became a key tool in locking people into a cycle of borrowing, paying interest, and often just paying enough to keep going, one swipe at a time.

Credit cards have gone from luxury to necessity in society, and the average household debt has climbed with it. That little piece of plastic has evolved into one of the most effective ways banks keep people spending money they don’t have and paying for it in ways they barely notice. In other words, this is about the business of enslaving a populous.

Roots Of The Enslavement (DinersClub 1950)

The concept of credit has been around for centuries, with early forms like credit coins and charge plates used by merchants in the late 19th and early 20th centuries. These early systems helped companies and select customers build loyalty, but they were limited and highly localized. Fast forward to the post-WWII era, and the seeds of modern consumer credit were planted when credit became more practical for everyday purchases. This shift reflected society’s rising income levels, the growth of consumer goods, and new spending habits.

In 1950, a key event marked the start of modern consumer credit. Frank McNamara, a businessman who had forgotten his wallet while dining in New York, conceived the idea of a universal charge card. With his partners Ralph Schneider and Matty Simmons, McNamara founded the Diners Club, a charge card initially accepted by 27 restaurants and two hotels in New York City. Unlike today’s revolving credit cards, the Diners Club card was a charge card, meaning it required users to pay off their balance in full each month.

The Birth Of Today’s Credit Cards (Bank Of America 1958)

After Diners Club proved people were ready to ditch cash, other companies jumped on board. American Express launched its card in 1958, going for high-end appeal and pitching it as a “status card” for the well-to-do. But Bank of America had a different plan in mind—they wanted mass appeal. So they rolled out the BankAmericard (now known as Visa) that same year, offering something novel: revolving credit. This meant people could spend beyond their means and just pay it back over time—plus interest, of course. This was officially the first-ever credit card as we know them today.

To make it big, Bank of America mailed these cards out like candy to thousands of households. But back then, there was no magnetic strip to track spending. Fraud was rampant, and they lost millions! Yet it worked in their favor—they built a huge base of users who were now comfortable spending on credit, the only problem was that they were not profiting from it. By 1966, other banks were asking to issue their own BankAmericards, and Visa was born.

Once magnetic strips arrived in the ‘80s, fraud dropped, and credit became America’s go-to payment method. Interest caps eventually loosened, and banks pushed rates over 16%, making credit cards insanely profitable.

You Get A Credit Card - You Get A Credit Card (1980s & 90s)

In the 1980s, a little place called South Dakota decided to lift its caps on credit interest rates. Guess who came knocking? Banks from all over the country. Thanks to the Marquette decision by the U.S. Supreme Court, banks based in South Dakota (or any other state with loose lending laws) could “export” their interest rates nationwide. Meaning a bank could charge its steep South Dakota rates to someone all the way in California, even if California had stricter interest regulations. With this loophole open wide, banks saw an opportunity they couldn’t pass up.

Suddenly, everyone was getting a credit card offer—students, young adults, people with little or no income. Banks threw credit cards around like confetti, but there was a catch. Miss a payment? Welcome to sky-high interest rates that could trap you for years. By the late '80s and early '90s, banks were raking in profits, with companies like Citibank reaping huge rewards in the early 2000s.

Then came the Smiley decision, another Supreme Court ruling, that lifted regulations on fees, late charges, and interest rate changes. Now, banks could adjust rates almost on a whim. With some cards hitting rates as high as 36%, a $10,000 balance could balloon into $14,000 in two years. Suddenly, even people who kept up with payments saw their rates spike, and banks could charge whatever fees they wanted.

Credit cards had officially evolved into the ultimate debt trap, and banks weren’t shy about cashing in. Now, the game was simple: hand out credit cards to anyone who’d take one and wait for the money to pour in.

The World’s Number One Payment Plan (2000s)

By the 2000s, credit cards had become essential, even for low-income households, doubling in popularity. Banks were determined to expand their customer base even further, so they targeted an easy group: college students. Most young adults wanted quick cash but weren’t keen on reading the fine print, making them ideal candidates for credit cards with high interest rates and strict penalties. For credit card companies, customers who paid off their balance each month weren’t profitable, so they zeroed in on “revolvers”—people who carried balances and racked up interest charges. To get more customers in this cycle, they offered tempting rewards, low introductory rates, and lowered the minimum payment, making it easy to overspend.

Contracts became loaded with hidden clauses, letting banks raise interest rates if a payment was missed with another lender or by setting due dates on weekends and holidays. They also pushed paperless billing, which many customers wouldn’t review carefully, allowing fees to accumulate.

Today, the average American family holds over $8,000 in credit card debt, much of it stacked with penalties and interest. Even families who file for bankruptcy find themselves receiving new credit card offers. Credit card companies had mastered the art of turning convenience into a cash cow, ensuring that debt cycles—and the profits they bring—continue.

A Trap for Some, a Tool for Others

This is far from an anti-credit card newsletter. I personally love them, use them very often, and I've never paid a single cent in interest to credit card companies EVER.

Credit cards don’t have to be a financial trap. If used wisely, they’re tools that can build your credit history, earn you rewards, and even protect purchases. The trick is simple but powerful: avoid the bait. Only buy what you can afford in cash and always pay off your full balance each month, Simple enough right? When you do this, you stay interest-free and avoid the revolving debt that catches so many people.

Credit cards, in the end, are like a sharp knife. In the hands of a chef, it’s essential for preparing great meals and can be used to do great things, but in the wrong hands, it’s dangerous. Master them, don’t let them master you. Treat credit as cash, and you’ll sidestep the debt spiral banks hope for.

Owning Your Financial Future, One Swipe at a Time

Credit cards are everywhere, marketed as essentials for freedom, convenience, and rewards. But genuine financial freedom comes from owning your money, not by swiping on credit. Every swipe is a decision that either brings you closer to financial independence or inches you toward debt.

So before you pull out the plastic, ask yourself, "Will this purchase matter tomorrow? Is it helping me build the life I want?" Let your money serve your goals, not the banks’. With a little discipline, credit cards can be useful tools in your financial toolkit—but don’t let them run the show.

Next time you’re about to buy something, make it a choice, not a habit. Think of each purchase as a step towards your future freedom. Because at the end of the day, true independence is having control over every dollar and making it work for you.

As always thanks for reading.

Finance Vaults.

QUOTE OF THE DAY

If you want to read some previous newsletter installments👇