As I was changing into my uniform for work today, someone had a radio station playing over the PA system in the locker room at work. As I was listening, there was an ad for some credit company, promoting their "product" with an offer for a zero-percent interest loan right at the beginning of someone's use of their service. This was framed as a quick way to get some Christmas money, and it was also called several times "free money." That bothers me to no end, and I think it should be illegal to call something free which clearly isn't. Anyone using this service definitely has to pay that money back.
Now, I see something similar every time I get a credit card bill. (We don't actually use our credit cards, except for emergencies, which we haven't yet had, and for expense items that will be repaid by work - even so they still send the dang bills.) I don't know about you, but every credit card bill I've ever received had a "check" attached, made out to me for several hundred dollars. I've been raised to distrust, even abhor, borrowing money, so this has never caught me. However, I wonder how many people cash that check, whether they know that they will have to pay it back or not.
I just think that credit card companies are just barely legal and should be required to be much more forthcoming in their information disclosures. I would hope that this would lead to lower levels of indebtedness. However, I realize that the real reason we Americans owe so much in consumer debt is that we simply want more "stuff" than we can afford. Our hearts are never content, always seeking more only to find that more doesn't satisfy either.
Some people might point out that lower levels of consumer debt would cause an economic slow-down because people aren't buying as much. This would lead to a loss of jobs. However, I think that would only be temporary. When people are no longer saddled by such debt, they will have much more income to spend on things because they won't be paying the interest. The key is having the patience to wait, which most just don't have.
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6 comments:
I enjoy my credit card. It lets me not carry a wad of cash, I can be quick at the gas station and I can see everything I buy when I get the bill.
However, I DO NOT carry a balance. This is where people mess up. I understand there are instances where balances are neccessary, however I feel this is where most people flub.
If you have poor credit, why should you even be allowed to carry a balance. I don't understand today's mindset, of "I should have it, and I'll pay when I feel." When did this become ok?
Something maybe the church could help with. Educate youth and adults of good spending habits.
I use my debit card for most purchases, and it has the same convenience of a credit card. It keeps me from even having the opportunity to spend more than I have!
Leanna, I think the mindset you have about your credit is the way people should think. If they see it as a convenient way to make everyday purchases, then it's fine. However, most people see it as a way to get what they can't really afford.
Good spending habits has a lot to do with perspective of money. What is it for? All the fun things you want? Gifts to the church? Donations to the poor? Emergencies?
Debt holds us hostage: with it, we can't be generous to others.
Credit card companies (and the companies that own them - like Bank of America owns MBNA) earn money in 2 ways: a fee that the store pays when you buy an item with the card (and this works with debit cards, too) and by charging interest to people who are unable/unwilling to pay the full balance each month.
I think the first method of earning money is fine. It is simply charging for a convenience. However, the second seems predatory to me. They only make money if people go into debt and only keep making money if those people go deeper and deeper into debt. So, there is little incentive to help people control their spending and become debt free.
I'll comment again after lunch about what changes I think a credit card company could implement that would improve things.
Credit cards companies could do a service to people if they would do the following:
- lower interest rates - This could actually backfire, as some people will only spend more, but I think it is much more ethical to not charge so much for the borrowed money. They should rely more on the fees they charge the retailers for using the cards to make purchases.
- stop sending people credit card applications in the mail and stop sending fake checks and such - These companies already advertise all over, so why do we need them sending us new applications almost every day? We simply don't. They should just allow people to apply as they feel the need, not because of mass campaigns to get them to. Also, people already spend enough on the things, so stop tempting them with "checks" and promotional "free money."
- Since these companies already know all sorts of things about our financial lives, they should commit themselves to some form of limitations on the level of debt they will allow a customer to go into on their product. They could have credit counselors who contact people when they debt level gets out of control. This is sort of Big Brother-ish, but they'd might as well put that information to good use.
Anything else?
One of the cool things would be that the companies that chose to do this would have a huge leg up on anyone else not going along. They could be the "credit card that cares."
I hear Dave Ramsey's talk show and Financial Peace University is making headway in equipping folks with tools to get out of debt and a mindset to not get into debt again.
As far as credit card companies... totally agree. I hate the junk mail, but even more, I hate how they pose to be a "service" to us. Yes, they are convenient, but they are certainly not out to serve us.
The "credit card that cares" is a great idea! What a tagline, and if it were true, that would be awesome!
What you've suggested kind of sounds like the Philip Morris stuff about helping people quit smoking.
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