Explain why using credit to buy products and services wasn't common before 1920.
Question: Explain why using credit to buy products and services wasn't common before 1920.
Before 1920, using credit to buy products and services wasn't common due to several reasons:
1. Lack of Financial Infrastructure: There were no standardized credit systems or regulations in place to govern credit transactions. Banks and financial institutions were not equipped to handle small consumer loans, making it difficult for individuals to borrow money for everyday purchases.
2. Societal Stigma: Borrowing money for non-essential items was often seen as imprudent or even immoral. People generally believed in paying for goods with cash, and going into debt for luxuries was frowned upon.
3. Limited Demand and Supply: The demand for consumer credit was low because most people only bought what they could afford with the money they had. Additionally, lenders were not interested in offering small loans to individuals as it was not profitable.
4. Economic and Cultural Factors: The culture of consumerism was still evolving. Most goods were either made at home or locally sourced, and spending was focused on necessities rather than wants¹. The concept of buying now and paying later only started gaining traction with the rise of the middle class and economic prosperity in the 1920s.
The introduction of credit cards and installment plans in the 1920s significantly changed the landscape, making it easier for consumers to buy products and services on credit.
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