Secret History of Credit Card

NARRATOR: But what really attracted Citibank to South Dakota was an obscure Supreme Court decision that said a bank could now export its interest rate to other states. It was called the Marquette decision.

BILL JANKLOW: The Marquette Bank decision was a U.S. Supreme Court decision that said, forget where the bank is chartered. Wherever the credit decision is made, in whatever state, that's the place where you can apply interest, wherever you make the loan. In other words, if South Dakota had a 25 percent ceiling, then you could charge 25 percent, even to a loan in Florida.

BEN STEIN: The credit card companies hate people like me, who pay off our bills every month. And I know that because I ran into a fellow I went to high school with on the street, and he told me he worked for a credit card company. And I told him about how much I use credit cards and how I pay them off every month, and he said, "Oh, we hate you. We hate you guys. We call you deadbeats."

NARRATOR: "Deadbeats," in the upside-down world of the credit card business, are the people like Ben Stein, who pay off their bills on time. The industry's best customers are the 90 million Americans who don't pay off their credit card debt. They're called the "revolvers."

PAT WALLACE: Providian, for example, was accepting payments from consumers on their accounts, depositing the checks but not crediting the account for sometimes up to several weeks. What was the net result of that? Invariably, the consumer got a late charge.

LOWELL BERGMAN: They were holding payments so that they could charge late fees and they could charge overdraft fees and—