Credit

Definition

Credit refers to the ability to obtain goods or services before payment, based on the trust that payment will be made in the future. It is a crucial component of the consumer culture that emerged in the United States during the late 19th and early 20th centuries, enabling individuals to purchase items they could not immediately afford.

5 Must Know Facts For Your Next Test

1. The rise of credit-based purchasing power allowed consumers to acquire a wider range of goods and services, contributing to the growth of a mass consumer culture in the United States.
2. Installment plans, which allowed consumers to pay for purchases in fixed, periodic payments, became increasingly popular in the early 20th century, enabling the purchase of more expensive items like automobiles and household appliances.
3. Charge accounts, which allowed consumers to make purchases on credit and pay the balance at a later date, became commonplace in department stores and other retail establishments, further facilitating the growth of consumer spending.
4. The widespread use of credit led to the accumulation of personal debt among American consumers, which could have negative consequences for financial stability and overall economic well-being.
5. The availability of credit and the ease of obtaining it contributed to the rise of a consumer culture that emphasized the acquisition of material goods as a means of expressing social status and personal identity.

Review Questions

• Explain how the rise of credit-based purchasing power contributed to the growth of a mass consumer culture in the United States.
  • The availability of credit allowed consumers to obtain a wider range of goods and services that they may not have been able to afford with immediate cash payments. This enabled the purchase of more expensive items, such as automobiles and household appliances, which became increasingly accessible to the growing middle class. The ease of credit-based transactions facilitated the growth of a consumer culture that emphasized the acquisition of material goods as a means of expressing social status and personal identity.
• Describe the role of installment plans and charge accounts in the development of the consumer culture.
  • Installment plans, which allowed consumers to pay for purchases in fixed, periodic payments, and charge accounts, which enabled consumers to make purchases on credit and pay the balance at a later date, both played a significant role in the growth of the consumer culture. These credit-based purchasing options made it easier for consumers to acquire a wider range of goods and services, contributing to the rise of a mass consumer culture that emphasized the importance of material possessions and the ability to obtain them through the use of credit.
• Analyze the potential negative consequences of the widespread use of credit on the financial stability and overall economic well-being of American consumers.
  • The widespread use of credit and the ease of obtaining it led to the accumulation of personal debt among American consumers. This could have negative consequences for financial stability, as individuals may struggle to manage their debt obligations and make timely payments. The high levels of consumer debt could also have broader economic implications, potentially contributing to financial instability and economic downturns if a significant portion of the population experiences difficulties in repaying their debts. Additionally, the emphasis on material acquisition and the reliance on credit to finance purchases may have detrimental effects on the overall financial well-being and long-term economic security of American consumers.

Related terms

Installment Plan: A credit arrangement where a consumer pays for a purchase in fixed, periodic payments over time, rather than a single lump sum.

Charge Account: A type of credit account that allows consumers to make purchases on credit and pay the balance at a later date, often with the option to carry over the balance to the next billing cycle.

Debt: The state of owing money to another party, which must be repaid, typically with interest, over a specified period of time.