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Credit Cards Seem to be Yuppie Food Stamps

Dr. Robert Manning, a professor at the Rochester Institute of Technology and author of Credit Card Nation: The Consequences of America's Addiction to Credit, says Americans once understood the difference between good debt and bad debt. "We had Benjamin Franklin tell us about the great virtues of frugality and thrift and industry -- 'A penny saved is a penny earned.'" Manning argues that banks consciously had to alter those core values of American society in order to increase profits. "Banks had a multi-billion dollar mass-marketing strategy that led to the Nike 'Just do it' consumptionism -- the effort to get the new generation to reject those old school values."

Credit is no longer viewed as an earned privilege, where you had to have a job and demonstrate that you were worthy of a loan, Manning says. "This generation has been socialized [to feel] that it's an entitlement to have these kinds of lifestyles. They don't have to earn it. They don't have to be disciplined to save. As a result, credit cards have become a kind of 'yuppie food stamps.' That's a real serious impediment in terms of trying to inculcate basic financial literacy skills on this generation where they see all these abundant things in society that they think they deserve."

But Dr. Lendol Calder, historian and author of Financing the American Dream: A Cultural History of Consumer Credit, says the idea that the introduction of institutionalized consumer debt radically changed the behavior of people who once lived within their means is a myth debunked by history. Calder argues that although the "myth of lost economic virtue is alive and well" today, consumer debt wasn't invented in the 1990s, as many media reports and recent political stump speeches would have us think.

There's "a river of red ink" that runs throughout American history, Calder explains. "In the 1880s, a middle-class family would owe money to the doctor, the banker, the butcher, the hardware store, several friends, family members, and that looks pretty much like today, the only difference being the way they get credit. But the sheer fact of debt and credit is the same."