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I was recently talking to my mother, and she started talking about the evil credit card companies, and how they were out to get us all — right now — by jacking up our rates unfairly in a bid to record massive profits before new consumer-oriented legislation begins going into effect.
She cited personal examples of people who have been coming into the credit union where she works, telling tales of new fees, lower limits, and interest rates doubling overnight for no good reason.
And make no mistake — I totally agree that credit card companies are doing these things today. Moreover, I consider the actions both reprehensible AND counter-productive to the financial companies’ long-term goals.
Yet being the devil’s advocate that I am, I also felt compelled to point out to my mother — and now again here in these very public pages — that I think borrowers are just as culpable as the credit card companies.
Sure, the companies are motivated by self-interested greed. But isn’t that the same motivation that led to all of our country’s irresponsible borrowing, too?
Newsflash: Credit Card Companies Have Never Been Our Friends
And Their Products Shouldn’t Be Used as Long-Term Loans!
Collectively, U.S. consumers have had charge cards for about 90 years now. Since the end of World War II, buying on credit has become absolutely commonplace across the land.
And while card companies have certainly become more and more aggressive with their marketing tactics, the general idea of “paying with plastic” has never really changed — even back when the Diners Club card was still made out of cardboard.
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| Even before they were made of plastic, credit cards were meant to be simple, convenient cash replacements not long-term loans. |
Basically, they’re a convenient way for people to pay for items without having to carry cash.
In the ’20s and ’30s they allowed rural customers to get gas when far away from home …
In the 50s, New Yorkers were able to dine at their favorite restaurants with that little cardboard card …
And today, just one swipe of a card will buy you virtually anything … most places in the world … with currencies automatically exchanged.
But people shouldn’t confuse convenience with necessity.
I can’t tell you how many verified stories I’ve heard about credit card balances north of $20,000 … $50,000 … even $125,000. Yes, seriously. In some cases, the folks didn’t even know the totals they owed because they had so many cards!
Now, some of those very same people are complaining about their skyrocketing interest rates.
Didn’t they read the fine print? You know, the contract that basically says “By the way, dear consumer, we can jack your rates up at will.”
More to the point: Did they even need to read the fine print? Isn’t it common knowledge at this point that financial companies will try to wring every last penny out of us through usurious fees and interest rates?
Heck, from the first time I got a credit card at age 16 with my dad’s help — to begin building my credit score — I knew it was the financial equivalent of a razor-sharp chef’s knife. A useful tool that could do a lot of damage without the proper training and caution. And to keep the metaphor going, not something you need twenty of, either!
It’s much like all the exotic mortgages that recently came back to bite our economy. When used correctly, these financial instruments have legitimate and helpful purposes. When used by irresponsible, greedy, or outright ignorant people, they end up hurting us all.
If you’re one of the rare people carrying a large balance because of extenuating circumstances (medical bills, a job loss, etc.), I feel for you. I really do. Especially if you’ve been paying on time and your lender is just sticking it to you because they can.
However, for the vast majority of the people complaining — the ones who have balances that can’t easily be paid off because they bought too many flat panel TVs — well, I hate to say it, but you got what was coming to you. You borrow from a loan shark, and you risk a visit from a thug wielding a baseball bat.
No Matter What, There Are
Always Options Available to Us!
Look, I think the credit card issue is pretty simple:
- Have one or two no-annual-fee rewards credit cards.
- Don’t borrow what you can’t pay back, especially if it’s for a luxury item (and most are).
- Pay off your balances on time and in full every month.
- Wash, rinse, repeat.
If your lender raises your interest rate? It won’t matter as long as you follow Step #3.
If you have a current balance that can’t be immediately paid off? Call and negotiate a better rate or move the balance to a friendlier lender with a better interest rate. Just watch out for balance transfer fees, teaser rates, and the like. And please focus all your effort on paying down that balance as quickly as possible, once and for all!
If your lender starts charging you fees or reduces the availability of rewards? Again, try negotiating or just cancel and go somewhere else. (Hint: Regional banks, credit unions and other slightly more customer-centric financial institutions are good places to look.)
Yes, there’s a chance that doing so will temporarily impact your credit score (and that’s a whole other rant that I delivered here back in June). But if you aren’t going to be shopping for a car or home anytime soon, your credit score is not the immediate concern.
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| If things get really bad in the credit card industry, I have a much simpler solution than new legislation! |
And if every card issuer starts nickeling and diming us? Let’s just go back to cash and other stone-age methods. Yes, Virginia, there was life before automatic bill pay!
The bottom line: I am hardly supportive of the dirty tactics being used by the credit card companies today. But I’m also sick of whiny, spoiled-rotten borrowers that didn’t understand what they were getting themselves into.
I’m a big believer in both freedom and personal responsibility. So the companies can exercise their right to try and rip us off within the letter of the law. And we can exercise our right to pay off our balances and walk away permanently when they tick us off.
Rather than have the government help consumers stay in arrangements they don’t belong in or understand, I’d rather see the usurious practices bring this topic to the fore and spur Americans back to at time of greater fiscal responsibility for us all.
Hey, at least I’m free to dream!
Best wishes,
Nilus
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