Credit cards financed our electronic whims, vacation fantasies and fashion fetishes. Now, in an economic downturn, experts tell us to pay off debt and stop charging.

How -- after decades of relying on plastic -- is that done? A look back at how we used to pay for things may help.

Not long ago, credit cards were rare and granted only to those with long and stellar credit histories. According to the Federal Reserve, Americans' credit card debt in August 1978, when credit cards were just catching on, was about $42 billion. Fast forward 30 years. In August 2008, credit card debt hit $969 billion, more than 20 times higher.

"Jackie Kennedy didn't have a credit card while she was in the White House, and she did just fine," says Catherine Williams, who, as vice president of financial literacy for credit counseling agency Money Management International, has researched the history of credit card use in America.

"Credit has allowed us to make purchases of items we simply can't afford, and we pay for them over a long time and end up paying a lot more for them," Williams says. "Americans have garage sales to pay for stuff they put on their credit cards. We're really purchasing our futures away."

Many consumers don't know any other way, however, so taking a look at life before credit cards -- or at least, before every American had a wallet full of them -- can help provide some insight on how to reprogram our credit mentality. "Despite all the nifty equipment we've got today to help us plan and save, we were much better planners and savers back in the old days," Williams says.

Here are some areas where old-time financial mores can reduce credit card dependence.

Groceries

Credit cards have become such a staple of daily life that some shoppers routinely use them to fill their grocery carts -- which makes budget-busting impulse buys more likely.

Behavioral economist Richard Thaler, professor of economics at University of Chicago and co-author of the book "Nudge: Improving Decisions about Health, Wealth and Happiness," has a favorite YouTube clip of actor Gene Hackman recalling an incident from decades ago when a young Dustin Hoffman asked him for a loan. Hackman walked into Hoffman's kitchen and saw a row of labeled jars. All had cash in them, except the jar labeled "food." Hoffman insisted he couldn't take money out of the other jars to pay for food.

"It's a funny story that illustrates sort of an old-fashioned mental accounting strategy of literally keeping money in separate accounts -- people used to use envelopes or cookie jars or something like that," Thaler says.

Food-buying clubs, an old-time technique for saving money on groceries that became popular during the Great Depression, are making a comeback. Members typically place a monthly order for basics, such as cereal, beans and grains, then gather to sort and unload the shipment for a savings of 10 percent to 20 percent or more.

"By the power of bulk buying, you not only reduce costs but force yourself to cook more from scratch," says Ronnie Cummins, director of the Organic Consumers Association. "Buying clubs are coming back now because of the economic recession." Consumers can contact the association to see if there's a buying club in their area -- Cummins estimates there are as many as 5,000 clubs in the United States -- or they can start one with friends, relatives or co-workers.

When shopping at grocery stores, experts say consumers can take a clue from the past by going into the store with a list and a budget and sticking to it. (Some budget-conscious consumers swear by online grocery shopping as a way to avoid overspending since it's not embarrassing to delete an item from the virtual cart.) Like dieters, consumers on a budget should stick to the outer ring of the store where staples such as produce, meat and dairy usually are stocked. That way, it's easier to avoid the temptation of spending on unnecessary items.

For the rest of this story, please visit: http://finance.yahoo.com/banking-budgeting/article/106097/Money-and-Credit-Lessons-From-the-Past

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