Personal Finance, Personal Responsibility, and You (well, me.)

[authors note: God brought these thoughts to me by way of a discussion on simplicity that I led at house church. Woot, house church!]

Hello, kiddies!

It’s time to talk about credit cards, more specifically how I (until today), have done my share of breeding oppression in my own neighborhood, and profited from it!

If you need a primer on credit cards, wikipedia is your man. or your woman. or your tool. hmm. Credit Card Wikipedia article.

Credit cards are all well and good, of course, and perfectly reasonable if you assume the following things:

1. People use their credit card responsibly.
2. Only people who understand the mechanics (i.e. compound interest) of not paying their bill are allowed to receive such a card.
3. Credit card companies maintain a policy that is socially responsible, as it relates to interest rates, what types of customers they target, etc.

Sadly, most informed observers would say none of these three things are occurring. Worse than that, the epidemic of debt is a dark thing, and is scary as you consider the effects it has on people (more on that later).

But who really cares, right? Eric should be concerned with Eric! (and he is). What other people do with their credit cards is their business, as long as I can control mine, then what’s the big deal?

Well, a long time ago I did a post about social responsibility as it relates to consumer products, namely: diamonds. I thought that would be the end of it, but that’s just not the case.

In fact, as I review the post now, the irony (ok, maybe it’s not irony, but it sounds good) is delicious. You see, in that post, I examined James 5:1-6 and showed through cause and effect, how I purchase products from companies that are oppressive to their workers puts responsibility on me, not just them, for their actions.

This is where it gets good. I said:

But then I realized something. It doesn’t have to be my workers. Every time I swipe my good ole’ little credit card and buy something from a company that does this type of behavior, if I have means to know about it (which, given the Internet, seems likely), I’m just as guilty as they are. [emphasis added]

How blind I was. How telling that I so quickly glossed over this little bolded nugget of joy at the time. You see, I’m coming to place where it’s not as easy to just stick a finger in each of my ears and yell, “LA LA LA LA” as loud as I can when I read and hear stories about how credit card companies behave. I can’t fetch the links at the moment (but will be glad to for any inquiring), but there are documented cases of companies holding payments till after the due date to incur late fees, charging incredible interest rates that no informed person would ever agree to if they understood what it meant, and other such policies. Not only that, but there are countless stories of people buried under ridiculous credit card debt, even to the point of suicide (which will be shown in the upcoming film [March 9th in theaters], MAXED OUT.)

At this point, some of you are blowing me off as trying to interfere in the free market economy, and that it’s not my place to be involved with the financial affairs of other people. The individuals, not the credit card companies, are the ones that ran up their bill, right? They signed the paper that got them the credit card, which explains in plain English (only as required by law, though) the terms of their agreement, and just how badly they get OWNED if they don’t pay the bill, right? Right? I mean, we don’t blame the car manufacturer for the car getting wrecked after someone was drunk driving, right?

And when those of you saying that, say that… I hear you. I believe all that stuff. It conflicts me when I think about such things.

Why does it conflict me? Because currently, the wife and I use a credit card with fairly favorable cash-back terms for our day-to-day expenses, solely for the purpose of collecting the cash back, which ranges between 1.5 and 5%, depending on the location. And I like it. We don’t have any credit card debt, we make money off the deal, and as a customer of any credit card company, we must be at very best marginally profitable, if it at all.

So I get to thinking about these companies. How on earth can they afford to give me 5% cash back on a decent proportion of purchases I make? You can’t get that deal anywhere else. I don’t pay them a dime over what I personally charged (that is, no interest $), so how does that work? Yes, I know these companies earn a large % of their income from charging retailers processing fees. Nevertheless, I continue.

It’s simple. The people they charge 22.9% interest, they just skim the slightest bit of that off the top, and hand me my profit. So let’s review:

1. Eric makes a charge, collects 5% cash back.
2. To pay that 5%, they pull from Joe Shmoe with $22,000 in credit card debt, who occasionally misses his payments, is dinged with fees, and who’s rates can jump up to 40% ish if he happens to default on any card he has.
3. CC Company and Eric profit, with the former doing much better than the latter, of course.

In essence, by being a customer of this company, I’m profiting off of the actions which at very best could be described as taking advantage of the people in my community. At worst, you could describe it as: “You have condemned and murdered innocent men, who were not opposing you.” (James 5:6)

Yeah, that’s kind of flamboyant. But consider that quote on spiritual terms. Credit card debt is soul-killing, as well as are the policies of these companies. If you want to talk about condemnation, the collection industry is king. It all keeps people from freedom.

And again, I hear the personal responsibility zealots decrying my words. This stuff moves beyond personal responsibility for me. I can’t control the policies of American Express, VISA, and MasterCard. It’s perfectly legal for them to market to whomever they like, because at the end of the day people have the choice. But damn it, they certainly can do so in a responsible way.

It’d be one thing if they made a big point of offering credit counseling and even advised some potential customers that perhaps this product wasn’t the best idea for them. Or even published studies about the effect of credit card debt on people’s anxiety levels. Or explained the math in the simplest of terms. But why would they do that? That’s not good for the bottom line is it?

All the while, I profit from it. Not nearly as well as they do, but still enough to make the product attractive to me.

Well, I’m done with it. Starting today, looks like the wife and I will be back to spending good ole cash. Sure the debit card will be there, but according to most evidence, you spend less when you use cash vs. a debit/credit card, so… cash it is. I’d love to discuss this topic further; feel free to email me or comment below.

FL: It’s like digg knows exactly what I would appreciate it, votes it to the top, and throws it on my screen: Fat Chick Gets Stuck In Cave, Traps Other Cavers Inside - huh.