The post-war era had a significant effect on consumer borrowing habits, marked by a sharp increase in the use of credit and installment buying, driven by rising incomes, economic optimism, and expanding consumer culture.
Key Effects on Consumer Borrowing Habits
- Increased Consumer Spending and Borrowing : After World War II, consumer spending grew rapidly as rising wages, falling prices, and greater job security made people more confident in borrowing money to buy goods. Installment buying, which allowed consumers to pay for items over time, increased dramatically-by about 800% between 1945 and 1957
. This enabled more Americans to purchase homes, cars, appliances, and other consumer goods than they otherwise could have afforded
- Government Restrictions During and Soon After the War : During the war, consumer borrowing was heavily restricted to curb inflation and redirect financial resources toward the war effort. For example, consumers had to pay a substantial upfront portion (33%) on hire purchase agreements and repay the rest within 12 months, while retail credit accounts had to be repaid within 90 days
. After the war, these restrictions eased as the economy transitioned to peacetime consumerism.
- Expansion and Innovation in Consumer Credit : The postwar period saw innovations in consumer finance, including the introduction of credit cards (e.g., Diners Club in 1950 and American Express in 1958), electronic banking, and a variety of new unsecured loans such as student loans and bank lines of credit
. These innovations broadened access to credit and increased consumer borrowing options.
- Growth in Consumer Credit Use Across Income Groups : Consumer credit outstanding grew from $6.8 billion in 1945 to over $3 trillion by 2013, reflecting broad growth in credit use across all income and age groups. While the greatest relative growth in credit use initially occurred among lower-income groups, since the 1960s growth has been more moderate and stable across income quintiles
- Consumer Credit Seen as Normal and Positive for Consumption : Over time, consumer credit came to be viewed as a normal part of modern economic life. Studies suggest that growth in consumer credit is positively related to future consumption, indicating that borrowing generally supports economic activity rather than causing recessions
- Cultural and Economic Drivers : The post-war baby boom, suburbanization, and the rise of consumer culture fueled demand for homes and durable goods, which were often financed through credit
. Consumer borrowing was also seen as patriotic and part of the American Dream, reflecting broader social and economic optimism
In summary, the post-war era transformed consumer borrowing from a restricted, cautious activity into a widespread, normalized practice supported by rising incomes, financial innovation, and cultural shifts toward mass consumption and credit use. This expansion of consumer credit played a central role in driving the economic growth and consumerism of the mid-20th century United States
