How Banks Use Credit Cards to Rip Us Off


The Secret of History of the Credit Card

PBS (2004)

Film Review

The Secret History of the Credit Card is an old Frontline documentary featuring Senator Elizabeth Warren when she was still a Harvard law professor and ex-New York governor Elliott Spitzer when he was still state attorney general. It traces the “secret” repeal (and circumvention) of state usury laws that allowed banks to charge as much as 30% on credit card loans. This, in turn, made credit card banks the most profitable companies in the US. In 2003, several of them earned higher profits than MacDonald’s or Microsoft.

In 1981, when Citibank made its infamous deal with South Dakota, high interest rates were causing a massive loss for credit card companies. Although they paid 12% on average to borrow funds from other banks, state usury laws capped the interest they could charge customers at 9%. In return for South Dakota’s pledge to repeal their usury laws, Citibank agreed to move their entire credit card operation to Sioux Falls South Dakota.

The documentary goes on to explore the various marketing ploys the credit card industry employs to con consumers into increasing the credit card debt on which they pay 18-30% interest.

In 2003, approximately 90 million US credit card customers were “revolvers” (paying 18-30% interest on monthly balances), and 51 million were “deadbeats” (the industry term for credit card users who get “free” credit by paying their full balance every month).

The filmmakers are also highly critical of the Office of the Comptroller of the Currency (OCC), the Treasury division charged with regulating banks. They provide several examples of attempts by the OCC to undermine the ability of state prosecutors to protect consumers against credit card companies’ flagrant lawbreaking.

In 2004 when this documentary was made, the Better Business Bureau received more complaints about credit card companies than any other industry.

For copyright reasons, the video can’t be embedded. It can be viewed free at

Also see Credit Card Nation – a great book on the credit card rip-off.

10 thoughts on “How Banks Use Credit Cards to Rip Us Off

  1. An interesting question is: Let’s say you and I both have $10,000 credit limits that we don’t use. Where is that money? Sitting in the bank waiting for us? And another question: Is there a limit on how many cards a bank can issue, and how many of them it can allow to borrow up to their limit? And most important of all: Does anyone actually control how much money a bank can lend? And where does that money come from? And please don’t tell me the are lending the money that depositors have in their accounts.


    • No, it’s definitely not sitting in the bank, Alan. The bank waits for you to borrow the money by using your credit card and then they create it out of thin air. The money doesn’t exist until you borrow it. You might be interested in seeing the film “Money as Debt” – it’s free on YouTube. It explains pretty clearly how money is created by private banks through loans.

      There’s absolutely no limit on how many credit cards a bank can issue nor on how much total money they can lend.And all loans work the same as credit cards. The banks create the money out of thin air.

      Theoretically a bank is supposed to have a certain percentage in reserve for every loan they make. However this isn’t real money, either. They borrow it from the Federal Reserve at 0% interest and the federal reserve creates the money out of thin air by issuing bonds.


  2. Pingback: Dupont: A Textbook Case in Corporate Criminality | The Most Revolutionary Act

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