Banks began issuing plastic cards as another way of providing credit to their customers. The card gave banks a cost-efficient way of increasing their volume of small consumer loans: a bank would have to handle only one application for a line of credit that could be used many times over—and it could make a profit from finance charges.

Originally, Diners Club, Hilton Hotels and American Express offered their cards as a convenience rather than as extensions of credit. In exchange for not having to carry cash, their cardholders were charged an annual membership fee. The T & E cards were not so much credit as charge cards, or what American Express calls "pay as you go cards. Also T & E cardholders could not make purchases in installments like bank cardholders, but. were required to pay their bills in full each month.

The cards have changed over the years, however. Today a T & E card can sometimes be used with "extended" or "deferred" payment plans. Diners Club members can choose to pay in installments for any goods or commodity the card can purchase, at 19.8 percent annual interest; at the same rate of interest, Carte Blanche cardholders can extend payment only for airline tickets. American Express also allows its regular cardholders to pay in installments but restricts this option to travel-related purchases (airline and cruise tickets, and tour packages). Its interest charges range from 18 to 21 percent, depending on the state in which the cardholders reside. American Express first extended credit when it came out with the Gold Card in 1966, issued through banks in which cardholders maintained lines of credit.

And just as the travel and entertainment cards have taken on bank card qualities, so too have bank cards become more like T & E cards.

Banks discovered that between 40 and 50 percent of their cardholders paid no finance charges because they did not use their plastic to buy credit. Rather, like T & E cardholders, they charged instead of paying cash, and then paid the whole balance on their statements each month. So most banks now do what the travel and entertainment companies have always done: charge annual fees for their cards. Bank card fees are lower, though: 12 dollars to 15 dollars, compared to the 35 dollars to 45 dollars paid annually by T & E cardholders.