essays

Cash or Charge?

The most-asked question in America. Imagine this. You dash into Neiman Marcus to pick up that must-have little black dress for a hot date tonight, then have to pay with cash or check. No money—no merchandise. Even checks might be a problem if the store doesn’t know you well. One wonders? How could the early boomer economy survive, much less prosper? Not to mention the crimp it puts in your personal style.

It’s the 1950s. “Credit” is a pat on the back. There are mortgages and car loans. A few department stores had begun experimenting with credit for regular customers but typically required a paid-in-full balance to continue “charging.” Contrary to popular belief, spoiled baby boomer kids cannot have anything they want at any time.

The modern credit industry was born with a red face. The president of a major loan corporation is entertaining friends at a restaurant. He reaches into his back pocket and discovers nothing. A frantic call sends his wife scampering downtown with the cash. Never again, Frank McNamara vowed, and from that humbling experience the Diner’s Club was born—a credit card that could be used at multiple restaurants. Initially, 200 cards are issued good at 27 establishments. There is no extension of credit. Remit each time and use again. Thank you for your prompt payment.

The idea caught on and Diner’s Club establishments expanded. It’s still a “niche market,” pitched mainly to business travelers, but not for long. The world was on the verge of a full-scale credit revolution just as the baby boomer generation is poised to drive the economy to uncharted heights.

Bank of America and American Express burst into the market with advertising blitzes offering the final answer to the American Dream—a buy now, pay later and later and still later plan valid across the country for all types of stores and services. America, start you engines! Now “Shop to you drop” was a reality.

The idea created a huge credit industry, ballooned retail inventories, expanded advertising horizons and greatly magnified collective joy and debt.

Terry Hamburg writes the Boomer to You blog about the exciting and revolutionary baby boomer years.