"What's Christmastime to you but a time for paying bills without money?"
Ebeneezer Scrooge posed that question to his nephew in "A Christmas Carol," by Charles Dickens.
Today, of course, you actually can pay bills without money. But there's a steep price to be paid for that convenience, and that price is a matter of interest, as Correspondent Russ Mitchell reported on CBS News Sunday Morning.
The holiday season left in its wake some little presents -- the credit card bills are in the mail.
Middle-aged woman shopper:
"Worry about it later, spend all year trying to pay it off and get ready for the next," is how one middle-aged woman shopper describes her strategy.
Americans charged about $108 billion between Thanksgiving and Christmas.
"What we're seeing is a transformation in American society in that now plastic is the primary means of currency," observes Robert Manning, a professor at the Rochester Institute of Technology. He says the U.S. has become "a credit card nation."
Last year, for the first time ever, more transactions were done with plastic than with cash and checks combined, Mitchell notes.
How important are credit cards to the economy these days, he wondered.
"Let's face it," Manning responded. "Almost 70 percent of our economy is based on what consumers buy. And overwhelmingly, people who use credit cards purchase far more with plastic than with green currency. Our economy would come to a halt if suddenly Americans started shifting from plastic to paper."
If you're looking for a credit card timeline, Mitchell says, the man to see is Walter Cavanagh.
He traced it for Mitchell: "We have the paper, and then the cardboard and then the little aluminum plates that you attach to your key ring, and then we have the small plastic one, and then the large plastic ones that are more like an IBM punch card, and then we have the credit cards that we're all familiar with, with the magnetic stripe.
Cavanagh can track their history from department store charge cards, to BankAmericard in the '50s, to today's Visa, Mastercard and American Express.
You see, Cavanagh holds the world's record for active cards. "Without getting today's mail, I have 1,497 different credit cards that have all been issued to me. Representing one-point-seven million dollars in credit."
But the flip side of credit, Mitchell reminds us, is debt. And we've become -- one nation under debt.
Americans owe more than $2 trillion on their 1.2 billion credit cards.That's an average of 7.6 cards per holder. The typical American is now carrying $2,627 in credit card debt.
But for all you happy credit card users, like a shopper who says merrily, "It's easy and it's quick. It's better!" – there are folks like Arlethia Washington.
"I thought," she says, "I had finally caught up with the American dream. Being a consumer, to be able to have plastic in my wallet rather than always having to pay cash. I just thought that was the best thing, I can take a vacation and pay it later, I can buy those shoes now and pay it later."
Her dream, Mitchell reports, eventually left her $40,000 in the hole. "I just somehow managed to get sucked into this whole credit card thing," Washington admits. "I said I knew better, but it just seemed like something that you could handle."
When she realized she couldn't, Washington turned to bankruptcy attorney Charles Juntikka for help. Juntikka's wrath toward the credit card companies is known to be almost -- biblical.
"You know, Jesus was very peaceful. But one time he got a little violent when he went to the temple and the money changers were there. And, you know, they were the credit card executives of their day. And he took those tables and he threw them on the ground," Juntikka says.
He thinks the credit card companies are intentionally luring people into too much debt: "People use the credit cards as like a safety net. But it's not a safety net. It's a trap. They give you a low interest rate. And then, as you build up the debt, they start to raise the interest rate. Saying that, well, now, you owe too much. So the interest goes from 9 percent to 28 percent."
And, here's what really has credit card critics upset these days. It's called "universal default." If you miss a payment on any debt -- your house payment, or a car payment -- you can find your interest rates jumping on all your cards. And, adds Juntikka, "In fact, you don't even have to be late for them to raise your interest rates."
And there's no cap on those rates.
"You have no recourse whatsoever," Juntikka stresses. "Because of the contract that you signed. Now, you need a magnifying glass (to see the fine print). And as a lawyer, I gotta tell you, I don't even understand half of what's in there. And I can't read half of what's in there. But if you look at some of these contracts, it says that they can raise it for quote, unquote 'any reason.' …Any reason."
The credit card companies speak through the American Bankers Association, whose chief economist is James Chessen. "We know that there are people who drive recklessly and get a lot of tickets. And their insurance company charges them higher rates because they're costing all of us something as good drivers if (the insurance companies) don't. So it's very similar to that. You need to price according to that risk so that the best customers, who are really the vast majority of people with credit cards, can get the best possible rate.
"What's happening is that a credit card company is saying to that individual, 'You are a very high risk. That your credit history is showing that you've mishandled your financial affairs.' "
Professor Manning says, "In the old days, the best customer was someone who could pay off their loans. Today, the best customer is someone who may never pay off their loans."
Because, he explains, that means more money for the bank in interest: "More revenue streams, more late fees, more over limit fees, and higher interest rates."
"I think a lot of it is personal responsibility," Chessen asserts. "I mean it. Credit cards are so easy to use that we sign the receipt without thinking about what it is. But every time someone signs that receipt, you should say, 'I'm taking out a new loan.' And if you actually look at that receipt, it says, "I agree to pay based on the conditions of my credit card company." So it's a loan that you're taking out.
And the world of the future promises -- more plastic, Mitchell says. Credit card companies are aggressively marketing to college students. And they want you to charge things costing only a few bucks, like a burger, or a latte, or a soda from a vending machine.
Meaning more temptation for people like Washington. She's now filing for bankruptcy, and uses only a debit card. "Even when they look at my credit history, they still offer me credit cards!" she marvels.
Perhaps, suggests Mitchell, we could all profit from credit card world record champ Cavanagh's example.
"For my daily life," Cavanagh says, "I use just one or two, and I pay the bill off every month. I owe nothing on these cards, on any of them."
So, Mitchell concludes, if that Christmas binge got out of hand, it might be time for a New Year's credit card resolution, before that ball drops in Times Square.
This story ran on CBS News on December 26th, 2004.