Frontline - The Secret History Of The Credit Card (PBS)(2004).avi

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Transcript: http://www.pbs.org/wgbh/pages/frontline/shows/credit/etc/script.html

It's one of the most wonderful times of the year for the banking industry's most
lucrative business: credit cards. In the coming weeks, millions of Americans
will reach into their wallets and use plastic to buy an estimated $100 billion
in holiday gifts. But at what cost?

In "Secret History of the Credit Card," FRONTLINE® and The New York Times join
forces to investigate an industry few Americans fully understand. 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 641 million credit
cards in circulation and accounting for an estimated $1.5 trillion of consumer
spending, the U.S. economy has clearly gone plastic."

Millions of American families use their personal, general-purpose credit cards
such as Visa, Mastercard, American Express and Discover to make ends meet;
credit cards have been a discreet lifeline for families in financial straits.

But other consumers, 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." That's because he pays his
balance in full every month.

The industry's most profitable customers, the ones being sought by creative
marketing tactics, are the "revolvers:" the estimated 115 million Americans who
carry monthly credit card debt.

Ed Yingling, incoming 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 family
owes roughly $8,000 on their credit cards. This debt has helped generate record
profits for the credit card industry -- last year, more than $30 billion before
taxes.

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.