By
What I hate is the way credit card companies sell sell sell their product. It's flat-out deceptive. The card companies sell you on the idea of buying, but their real product is debt. Of course, no one wants debt, so debt is never mentioned. Instead, they sell you on the idea that you can have anything you want. All things are possible to he who holds the gold card. Want to fly across the country and surprise your girlfriend? Go for it, guy!
Need a new dress, new shoes, furniture? Just hand over the card and take it home. Want to eat out instead of dealing with dishes? Hey, you deserve it!
We all like to feel that all things are possible, but wakey, wakey, all things are not possible, at least not for most of us -- and not without a lot of hard work. Until they repeal the laws of economics, one still cannot buy without paying -- either pay now or pay more later. Where is that message in the ads that say you can have whatever you want?
I have yet to see a single credit card that mentions how useful they can be for tracking expenses. OK, that's not very sexy. What really amazes me, though, is that I haven't seen an ad suggesting that they are excellent for emergencies, either. MasterCard's most socially redeeming value is that you always have a way to pay for things like a tow truck. I think I remember an ad like that years ago, but not these days.
That got me to thinking like Ms. Vice President of Marketing. I'm reviewing a proposed ad campaign. The first ad shows a young driver using her credit card to pay for a new water pump because hers blew out on the interstate. The second features a young mother paying for a middle-of-the-night emergency room visit. The third has a college student using his card to catch a plane home when his brother is sick.
"Sorry," I say. "This campaign is a downer. We don't want to be associated with breakdowns and sick kids. No, it's much better to show the people paying for bungee-jumping trips. Let's see some more positive ads!"
Then there is the trash that arrives almost daily in my mailbox, urging me to transfer my balances to this or that card to take advantage of the low introductory interest rate. If you don't want to transfer a balance, just write yourself a check and use the money for anything you like! In the small print you can read about the real interest rate that kicks in a few months down the road -- 16% or higher. (With the Federal Reserve's recent rate hike, I doubt even those of us with the best of credit will see 16% any more.)
I know you've all seen dozens of examples of why credit card interest is such a killer. I don't need to belabor that point. So here's just one thought: $11,000 in debt at 18% per year costs the borrower $2000 a year. Put that $2000 into a Roth IRA instead and earn 18% via the Foolish Four... and in 30 years you will have 1.5 million dollars tax free.
In the interest of full disclosure, you should know that I do have substantial credit card debt myself, and the payments on it are not comfortable. But, that's not the credit card company's fault. I deliberately used my cards for living expenses incurred when I went back to college in 1995 to study finance, economics, statistics, and other essential topics that I avoided my first time through the higher education system. I am grateful to have had the ability to finance that additional education. Without it I might still be working as a technical writing hack. Thank you, Visa.
So, this war really isn't personal. I know most readers of this column just toss the card solicitations in the trash and when an American Express ad comes on TV, you leave the room and head for the john. But, for some, those ads and pre-approved offers are like waving a drink in the face of an alcoholic. It's just a rude, inconsiderate thing to do.
The rest of us are smart enough to know that we can't buy whatever we like, and that spending too much -- whether you do it with plastic or cash -- is the road to financial pain, not paradise.
Cool. We can handle it. Or can we? How often does all that advertising give rise to a vaguely dissatisfied feeling -- a feeling that we aren't really doing as well as we should be, that we are missing out on the good life because we can't afford to jet off to Jamaica for the weekend?
I am a firm believer in individual responsibility. People who get into trouble with debt have only themselves to blame. But, the credit card companies have a responsibility, too. They have a responsibility to market their product accurately. And that product is debt, not lifestyle enhancement. We need more truth from the credit card companies.
I have two more years before my debt is paid off, and I regularly shift it from one bank to another to take advantage of those "low introductory rates." By switching banks a couple of times a year, I've kept my actual interest costs down to 4-5% per year so far. I'm confessing this publicly in the hope that the credit card companies will read it and decide to stop sending me those pre-approved solicitations. Listen up, Visa. I'm a BAD customer! You don't want me. I'll just use you then split right about the time you have hopes of actually making some money off me!
Honestly, it would be worth the higher interest rate to be able to reclaim my mailbox -- and my sense of what is truly possible.
Fool on and prosper!
Related Links: