Tuesday, May 19, 2009

The End of an Era

Credit card companies--whose usurious interest/fine policies are now suddenly under fire from politicians seeking broader support from the long-ignored working poor--now want to begin charging their loyal, bill-paying customers annual fees and collecting interest immediately after each purchase, eliminating the several-week grace period such people currently enjoy.

Why would they do this when it will stop most of those people from using credit cards for anything but online purchases? To make up for lost income on which they have ill-advisedly come to rely.

Is that not like a pimp who also owns a strip club charging a higher cover and more money per lap-dance to loyal bill-paying customers after the Feds shut down his pimping side-business? Hmm...maybe that's a stretch.

I really hope the government prevents them from enacting those policies, although for some reason I feel it will be difficult to prevent, despite the fact that we actually own most of those companies now...

Oddly, the most irritating thing about this New York Times Business Section article about the current credit card situation is not all that, but this:
People who routinely pay off their credit card balances have been enjoying the equivalent of a free ride, [David Robertson, publisher of the Nilson Report, which tracks the credit card business] said, because many have not had to pay an annual fee even as they collect points for air travel and other perks.

"Despite all the terrible things that have been said, you're making out like a bandit," he said. "That's a third of credit card customers, 50 million people who have gotten a great deal."

A 'free ride?' How, exactly, have we gotten a free ride? It seems that credit card companies--and their highly-paid advocates in politics and the media--would like you to think they only make money when their customers don't pay their bills on time.

Not true.

If this NY Times article were better researched and more evenly reported, it would mention that credit card companies reap billions of dollars a year from doing exactly what credit card companies are supposed to do--taking a small cut from every purchase charged to one of their cards.

Why do you think a lot of small businesses don't allow their customers to use credit cards? It is partly to keep some transactions off the books, for sure, but mostly it is because allowing credit card use will either cut into their meager profits or result in them needing to raise prices slightly, thereby losing any competitive advantage they may have had against larger, corporate stores.

Fees and penalties were supposed to be gravy for credit card companies, a bonus to help fill the coffers, to smooth them through low spots in consumer spending, not the main source of revenue. But greedy people are greedy and once the bankers smelled blood they got a taste for it; they saw an opening, an immoral and quasi-legal income stream to exploit, and they did so with gusto.

The fact that credit card companies and their bloated executives now rely too heavily on penalties in a somehow-still-insufficient attempt to quench their insatiable thirst for moneymoneymoneymoney is not my fault. It's not your fault.

It's nobody's fault but their own.

This whole scenario calls to mind a similar problem we have with parking tickets.

Example: I got a parking ticket in Los Angeles the other day. It seems I forgot to move my car in time for street cleaning, which resulted in a $58 fine.


If I were making $7-8.00/hr--which is what most people with jobs actually make these days--that parking fine would be an entire day's wages. Does that sound fair? No way.

Oops--I forgot to put a quarter in the meter. $45.00 fine. What?!

Clearly these fines have gotten out of hand and need to be corrected, but the problem is that--much like credit card companies--cities have come to rely heavily on the millions of dollars of annual income from parking fines. Each year, their budgets are based on an expected amount of parking violations, the number and salary of their employees reflect this future wealth, and holes in city budgets are able to be plugged with whatever might be left over.

Therefore, if ticket amounts were reduced to a sensible level, or if car owners suddenly became more vigilant and stopped making mistakes, cities would either go bankrupt or be forced to enact an immediate and many-fold increase in the annual automobile registration fee.

And so here we are, living in a world where both our city governments and banks have come to depend on bad behavior and excessive fines to keep themselves solvent.

And it's somehow our fault, and so we must pay. Or cut up our credit cards!


1 comment:

LiteralDan said...

I'm one of those responsible credit card holders, who's never carried a balance, ever, and I can confirm that I would gladly cancel any card that charged me a membership fee, and just go back to paying cash.

The only reason I use my credit card for everything is so I can wait 4-7 weeks to actually pay for things, and because they give me 1-2% cash back for doing so.

It's definitely win-win, for me, but not to a degree that I feel I owe them a thing.

Don't get me started on street-sweeping tickets for streets that are never swept. I wonder if my town even OWNS a street sweeper...