DAY THRIFT DIED
The launch 50 years ago of the credit card was hailed as a moment of social liberation. In fact, it ushered in wanton consumerism and instant gratification and left millions saddled with debt
FIFTY years ago this summer, Britain entered a new age. It was, of course, the summer of 1966 — the year Twiggy burst on to the fashion scene and The Beatles released their album Revolver. But despite all the excitement about Carnaby Street and Swinging London, the innovation that really would change millions of peoples’ lives that summer was surprisingly unprepossessing. It was a little plastic card, just over three inches long and two inches wide, that slipped almost unnoticed into your wallet.
The credit card first came to Britain in the summer of 1966. And now, half a century after Barclaycard made its debut, modern life would be almost unthinkable without it.
Today, more than 31 million of us have one, spending more than £15 billion a month and, a few weeks later, frowning gloomily at the bill. At the time, this little piece of plastic was seen as an instrument of liberation.
Barclaycard ran gigantic newspaper ads consisting of a wide expanse of clean white space and the message: ‘Barclaycard makes shopping simpler for everyone.’
Yet in an age when millions of us have become slaves to consumerism, when the British are among the biggest borrowers in Europe and when national household debt has ballooned to a staggering £1.5 trillion, those ads look rather less innocent.
In the 50 years since the launch of Barclaycard, millions have lost sight of the virtues of thrift, saving and self-discipline. In love with shopping and spending, obsessed with the latest fashions and gadgets, we live in an age of instant gratification.
And with many financial experts warning that a post-Brexit economic downturn could plunge millions of families deeper into the red, I fear we will come to look back on that first credit card not as a blessing but as a curse — a little rectangle of plastic that could blight our lives for years to come. Indeed, this week, the UK’s financial watchdog, the Financial Conduct Authority, said that 9 per cent of cardholders have balances that would take them more than a decade to repay.
The idea of credit was not invented in 1966. For decades, many British families had bought goods ‘on tick’ from door-to-door salesmen and local businesses.
Though many people deeply believed in the importance of thrift and economy, much of the boom after World War II had been driven by hire purchase, or ‘ HP’ — where you pay in instalments while having ownership. ‘The whole nation has taken to buying nearly everything on the instalment plan,’ the chairman of Great Universal Stores gleefully told his shareholders in 1958.
SINCE HP was typically organised by stores, Britain’s banks were naturally keen to profit from the post-war boom. By the early Sixties, they were looking for inspiration across the Atlantic, where shoppers had enthusiastically embraced the Diners Club and American Express cards, launched in 1950 and 1958.
It was Barclays who moved first, unveiling their scheme to the public in January 1966. Cannily, they presented it not as another form of debt, but simply as a way of making shopping easier.
As their first press release disingenuously put it, the scheme would cut down on the amount of cash you needed to carry, and was ‘ designed to appeal not only to those who must travel and spend a good deal of money in restaurants, but also to the everyday shopper throughout the country’.
The Barclaycard scheme was a mixture of Ealing comedy amateurism and ruthless profes- sionalism. It was based in a former shoe factory in Northampton, where 30 employees were given the target of recruiting a million cardholders in just six months.
As the spring of 1966 gave way to summer, they hired dozens of ‘Barclaycard girls’ in skimpy mini-dresses, who were sent to local High Streets to ‘help educate and change people’s minds’. But despite the appearance of innocent fun, Barclaycard’s marketing drive was nothing if not cynical.
Not only did the firm send 23 million application forms to potential customers across the country, but they also sent out a million cards to existing Barclays clients, whether they had asked for them or not.
Today, such a move would be illegal, but in 1966 the weakness of the regulatory regime meant Barclays got away with it.
At the time, the Daily Mail’s City editor, Patrick Sergeant, presciently warned that credit cards would be an ‘easy road to riches’ for the banks, since the American experience showed that ‘most customers spend more than they ought to when it’s on tick’.
Unless people were careful, he warned, they could be sucked in by an ethos of ‘spend now, pay later’. But the people behind Barclaycard was clever. The adverts never used the words ‘debt’ or ‘borrowing’, and made no mention of interest payments. Like many innovations of the Sixties, they were very carefully designed to appeal to women.
‘All a girl needs when she goes out shopping,’ read the slogan in one 1966 advert, which shows a credit card peeping out of a fashionable red handbag.
‘If I had a Barclaycard,’ added the small print, ‘I’d be able to sign the bill in thousands of shops all over the country — and pay you at the end of the month. What’s more, they say the service wouldn’t cost me anything.’
Two years later, the firm even made a short cinema film, Travelling Light, showing a nubile young woman strolling down the High Street with a Barclaycard tucked into her bikini bottoms. ‘Every second is worth watching,’ read the tagline. ‘You will see Barclaycard in action, and we mean action!’
In effect, Barclays were seducing people into debt. But it worked. The first credit card was an overnight success, and by 1972, with more than two million cardholders, Barclaycard was turning a tidy profit.
By then other banks were rushing to follow suit. In October 1972, Nat West, Midland, Lloyds and RBS joined forces to issue the Access card, famously advertised as ‘your flexible friend’.
As before, the banks’ marketing strategy took the hard sell to extraordinary lengths. Access sent out almost four million unsolicited cards to ordinary bank customers, hoping to lure them into spending on credit.
As a magistrate put it at the time, it was hard to imagine a more dangerous ‘ passport to fraud’. The Access brand lasted 24 years before it was
taken over by the U.S. giant MasterCard. But by then, British shopping habits had undergone a revolution. With the Thatcher government relaxing credit restrictions in the Eighties, ‘live now, pay later’ became the mantra of a generation.
As before, Barclaycard led the way. By 1985, eight million people had Barclaycards, most famously Alan Whicker, whose TV adverts made a virtue of his unflappable charm.
ThE irony is that Mrs Thatcher was extremely thrifty, deplored debt and did not even have a credit card. In 1989, she bashed the Labour Party in the house of Commons for its role in the ‘Labour Co-op Visa card’, which urged people ‘to spread the cost of Christmas, birthdays or summer holidays’.
‘We all receive many leaflets advertising credit and usually they go straight into the waste paper bin,’ she said witheringly.
In this respect, however, she was quite wrong. Far from throwing the adverts in the bin, millions of people were eagerly applying for multiple cards.
By the time she stepped down as PM in 1990, total credit card debt had risen to £10 billion, a figure that seemed gigantic at the time but was a mere fraction of the £67 billion that British cardowners owe today.
But we should not be snobbish about all this. As Professor Frank Trentmann argued in a brilliant history of consumerism published earlier this year, credit has often been a genuinely liberating force — particularly for women, who did always not have the same financial resources as men.
As Trentmann points out, too, people who deplore credit cards often tend to be well off. It is all very well for the silver-spoon rich to sneer at poorer people for depending on credit, but very few people have the resources to splash out on a new car — let alone a house — without going into debt.
Indeed, most people are better at handling their personal finances than we commonly imagine. A recent study of the British people’s financial affairs found that only 4 per cent were behind with their credit repayments by more than two months.
And yet despite all this, I am not convinced that we should celebrate Barclaycard’s 50th anniversary. The old values of thrift, self- discipline and deferred gratification — based on centuries of wisdom and the principles of Christianity — had a lot to be said for them.
I suspect future generations will be rightly contemptuous of our belief that borrowing and buying is the only route to happiness. As we have learned to our cost, rampant consumerism comes with a heavy environmental price tag.
how many of the goods bought on credit in the past half-century, I wonder, have ended up piled high in vast landfill sites, dumped by the side of the road or rusting at the bottom of the oceans?
What is really terrifying, though, is that our willingness to accumulate huge levels of personal debt may have left a devastating time bomb at the heart of the British economy. It is striking that, even at a time of sluggish productivity and stagnant wages, British consumers typically borrow around £5 billion a month.
Indeed, according to a survey by the insurance giant Aviva, the typical British household owes a staggering £13,520, without taking the mortgage into account (which on average is another £85,000).
Indeed, if you are of a thrifty, debt-averse nature, the figures make excruciating reading. The typical credit card holder owes £ £2,370, while the average British o overdraft stands at £1,190.
On top of that, one in four famil lies also has a personal loan, with a an average outstanding balance of £2,080. What all that means is that the British people owe almost £1.5 trillion, more than any other country in Europe.
As a nation, we pay a mindboggling £143 million a day in interest payments alone.
With credit card rates typically a at 21.6 per cent APR (Annual Percentage Rate, which is the full amount you will pay for a loan over the course of one year), it is no wonder that many financ cial experts — including the Treasury Select Committee — are seriously worried that many families would struggle to surv vive another economic d downturn.
Inevitably, we are constantly offered new ways to make it easier to spend with our cards.
The use of contactless purchases — and the rise in the amount that can be spent without using chip and PIN, from £20 to £30 — pushed spending up by 2 233 per cent over the year to £7.75 b billion last December.
Figures from the UK Cards Association showed that contactless spending in 2015 was more than double the previous seven years combined.
To put it bluntly, Britain has l lost any sense of how to live w within its means.
WE ARE among the worst savers in Europe, typically saving barely 9 per cent of what we earn, compared with 16 per cent in Germany, 15 per cent in Spain and almost 20 per cent in France.
The Chinese rate, by the way, i is 47 per cent — a figure that s speaks volumes about the wildly different priorities of greedy, complacent Britain and busy, b booming China.
In place of that traditional moral value of thrift, many have become addicted to spending and are chronically unable to cut our cloth according to our resources.
Youngsters have become debt addicts: the typical British graduate leaves university saddled with a £44,000 debt.
Little wonder, then, that as the Institute for Fiscal Studies has reported, seven out of ten British graduates will probably never pay off their university loans, and will spend the next 30 years making repayments before the debt is written off.
The truth is that while credit may appear to liberate us, it often ends up enslaving us.
From those first Barclaycards issued in 1966 to the latest financial enticements, credit preys on very human weaknesses — greed, materialism and jealousy — and turns them into someone else’s profit.
Above all, the success of the credit card rests on a gigantic conjuring trick.
For all the talk of ‘live now, pay later’, ‘later’ always arrives more quickly than you expect.
For half a century, that little plastic rectangle has been our guilty pleasure. But one day, our spending spree will surely come crashing to a halt.
And then, I fear, we will bitterly rue our love affair with debt.