FRONTLINE and The New York Times Investigate: Credit Cards

FRONTLINE and The New York Times join forces to investigate an industry few Americans fully understand in Secret History of the Credit Card, airing Tuesday, November 23, at 9 p.m. on PBS (check local listings). In this one-hour report, correspondent Lowell Bergman uncovers the techniques used by the industry to earn record profits and get consumers to take on more debt. The almost magical convenience of plastic money is critical to our famously compulsive consumer economy, Bergman says. With more than 640 million credit cards in circulation, the U.S. economy has clearly gone plastic. Millions of Americans use credit cards to make ends meet. Others, like actor and author Ben Stein, use plastic purely for convenience. While it would appear that Stein -- who says he charges a small fortune every month on his credit cards -- is the ideal customer, in reality, he is what some in the industry call a deadbeat. Thats because he pays his balance in full every month. The industrys most profitable customers, the ones being sought by creative marketing tactics, are the opposite of Stein; they are the revolvers: the estimated 90 million Americans who carry monthly credit card debt. Ed Yingling, executive vice president of the American Bankers Association tells FRONTLINE that revolvers are the sweet spot of the banking industry. This sweet spot continues to grow as the average credit card debt among American households has more than doubled over the past decade. Today, the average card-carrying American family owes a record $7,500 on their credit cards. This debt has helped generate record profits for the credit card industry -- nearly $30 billion just last year. Some experts say the profitability of credit cards really began twenty-five years ago, when the banking industry successfully eliminated a critical restriction: the limit on the interest rate a lender can charge a borrower. Deregulation, coupled with a revolution in technology that enables the almost real-time tracking of personal financial information and the emergence of nationwide banking, has facilitated the widening availability of credit cards across the economic spectrum. But for some, the cost of credit is often far greater than it appears. According to Harvard Law Professor Elizabeth Warren, the credit card companies are misleading consumers and making up their own rules. These guys have figured out the best way to compete is to put a smiley face in your commercials, a low introductory rate, and hire a team of MBAs to lay traps in the fine print, Warren tells FRONTLINE. Much of the industrys profit, critics say, is derived from what they call deceptive new tactics used to add to the bottom line. Spelled out in a credit card contract -- the terms and conditions of which can be changed at any time for any reason with fifteen days notice -- these tactics are often triggered when consumers hit an unanticipated bump that makes them particularly vulnerable. [Banks are] raising interest rates, adding new fees, making the due date for your payment a holiday or a Sunday on the hopes that maybe youll trip up and get a payment in late, says Robert McKinley, founder and chairman of Cardweb.com and Ram Research, a payment card research firm. Its become a very anti-consumer marketplace. American Bankers Association spokesman Yingling defends industry practices. Because the credit card business is basically unsecured lending, he says, the risks associated with the business must be offset. But thats of little consolation to consumers. According to the Better Business Bureau, credit card and banking companies are together the subject of record numbers of complaints. Its not an accident that the banking and credit card business generates more complaints nationally, across the country, than any other industry.... Out of one thousand industries that we trac