The History of Credit & Debt – General Credit Terms in Early Consumer America

By the 1920s, credit had exploded upon American society. It was too late to put the genie back in the bottle since the rise in consumer debt was merely an extension of a long-standing American willingness to get ahead by borrowing.

By this time, generations of Americans had been weaned on easy credit and would accept nothing less.

America was being flooded with new immigrants who needed new things. For every pot and pan that had been left at home, a new one was needed after arriving in America. By 1920, new immigrants comprised 44 percent of New York’s population, 41 percent of Cleveland’s, 39 percent of Newark’s, and 24 percent of the populations in Boston, Buffalo, Detroit, Philadelphia and Pittsburgh.

Average Annual Immigration Levels

1607-1775 – 3,500
1776-1884 – 14,200
1845-1900 – 322,000
1901-1914 – 923,000
1915-1965 – 270,000
1966-1988 – 482,000

Seventy years before this period the popular press was full of anti-credit sentiments. It was almost un-American to be in favor of credit. The ironic fact of that Victorian age is that while we abhorred credit, we could not survive without it.

During our puritanical past, debt was evil while credit was good. Credit was evidence of good character and trustworthiness, admired traits of the Victorian age. But debt, the natural by-product of credit, was regarded as an evil character flaw that cracked the spirit of man and threw him into “middle class hell.”

From 1853 we read, “Credit is one of the beneficent fruits of Christian civilization, and, though itself an effect, is in turn a most powerful agent in developing the resources of nations and accelerating their progress. But to contract debts without a reasonable prospect of being able to pay them when they become due, is both a sin and a sure source of perplexity and trouble.”

So while the ability to get credit demonstrated your position in society and what you could purchase with that credit determined your stature and class, there was a terrible struggle between the good and evil of credit and debt.

“People are gauged, not by their worth, but by what they are worth, or rather by what they seem to be worth. For these are times of show, more than of substance. It is one of the foolish and unwarrantable expedients for maintaining credit, to keep up an expensive domestic establishment; and you know not from any outward symbols, whether such an establishment is an evidence of wealth, or simply a device to preserve the appearance of wealth.”


Ask yourself why is it felt to be alright for the average consumer to qualify for the largest mortgage they can yet it is not alright for credit card issuers to provide them with large credit lines?

Do You Have a Question You'd Like Help With? Contact Debt Coach Damon Day. Click here to reach Damon.
See also  The History of Credit & Debt - When Did Credit As We Know It Arrive In The U.S.?

The shame and disgrace of debt has always been borne by the inability to repay your debts. If credit was a virtue, financial failure was not only dishonorable but was felt to be indicative of more disgusting character traits. Uncontrollable debt made you desperate and could lead to lying, cheating and the anti-Christian idolatry of gluttony, also known as Mammon.

“Think what you do when you run in debt: you give to another power over your liberty. If you cannot pay at the time, you will be ashamed to see your creditor, you will be in fear when you speak to him, when you will make poor, pitiful excuses, and by degrees come to lose your veracity and sink into base, downright lying: for the second vice is lying, the first is running in debt.”

Where Did You Get Credit

From the 1700s on, credit was easily available in America at the grocer, doctor, supply house, all tradesmen, etc. There has never been a shortage of credit in this country. Credit is as American as it gets. America was the great credit society at first because we needed capital to produce goods. Later, our thirst for credit exploded due to our desire to have greater and greater luxuries.

The desire for luxuries is not evil or bad in itself. What is a luxury? Is a chimney or glass window on your house a luxury? Today we don’t think so, but in Europe of the 1400s homes were not built with chimneys. And in the 1500s, if you had glass windows in your castle, you took them out when you left so they would not become damaged. These items were truly luxuries of their day.


Today, a piano would generally be thought of as a luxury, but we know the puritanical Victorians approved of piano purchases on credit because piano financing was considered productive borrowing. It wasn’t a huge leap from the need/desire to openly justify the merits or excuses for the purchase. Almost simultaneously, 1850s consumers dropped the pretense and went straight to advertising easy credit sales or, in the case of this illustration, to reasonable terms.

See also  The History of Credit & Debt - How to Budget, How to Buy, How to Pay

Follow Me
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
Steve Rhode
Follow Me