Monday, December 31, 2007

You Can't Handle the Credit Cards

The Byzantine complexity of credit card pricing structures makes it impossible for people to possibly use credit cards intelligently and responsibly. No amount of increased Truth-in-Lending disclosure or consumer financial literacy education will change this.

That's a quote from Adam Levitin's op-ed article on December 27:

Chicago Tribune: "Complex pricing of credit cards should be simplified."

I don't know about you guys, but I love being told that I'm not smart enough to use credit cards "intelligently and responsibly." Those of you who, like me, have used credit-card arbitrage to make yourself a few bucks on the side ... well, you should feel damn lucky.

...frequently I cannot calculate with certainty the costs of carrying a credit card balance, and my calls to card issuers' 800-number servicing lines have done nothing to clarify matters.

Here — let me calculate the costs of carrying a card balance for you: You take the Daily Periodic Rate, multiply it by your Average Daily Balance, and divide it all by the total of IT'S JUST FREAKIN' EXPENSIVE!

Which is Exhibit A in my case of REASONS TO NOT CARRY A BALANCE.

The lack of straightforward, easily comparable and understandable pricing is a major factor in the growth of credit card debt.

Oh, I dunno. I would prefer to point to the fact that people seem fairly incapable of not spending money they don't have.

So am I a mean-spirited hardliner, ranting against any sort of credit-card pricing reform? Nope. If reform happens, that's fine. But I constantly hear Elizabeth Warren of Two-Income Trap fame pointing out that card companies are the only ones that can change the terms of their customers' contracts whenever they feel the need. Rather than deride such "evil" and "greedy" and "malicious" practices, I'd rather focus on how it's another glowing reason to NOT CARRY CREDIT-CARD DEBT. Who cares what they do with their endless contracts if you don't owe them money?

At some point, consumers have to be responsible for their own shaky decisions.

Now, if you're one of those souls who can't be bothered to reconcile your checking account before spending money from it, then yeah, I imagine the credit-card small print pretty much abuses you. And if you can find yourself a free five minutes or so, you might just want to write Mr. Levitin a letter. Let him know you read his article.

And that you sure do appreciate being coddled.

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— Posted by Michael @ 9:34 AM


clap clap clap

Bravo! I won't have anyone tell me what I'm not intelligent enough to handle. Once you know how credit card companies do what they do, it's pretty easy to follow.



It's quite simple really! If you don't use the cards you don't have to pay their excessive interest fees!
Also, minimum payments get you nowhere; the credit card companies get rich off of people who make only the minimum payment.

Anonymous Just Julie
, at 7:57 AM, January 03, 2008  

You don't get it. It's not whether you're intelligent enough or not. It's that it is impossible to have sufficient information to know the cost of carrying a card balance. And if you don't know the price, you can't make an intelligent, informed decision whether to use the card for borrowing. Many people intend only to transact, but the law of large numbers says that some will end up revolving a balance inadvertently.

Anonymous Anonymous
, at 9:48 PM, January 31, 2008  

I "get it" just fine, thanks. At not point do I have to know the exact cost of borrowing on a card. All I have to know is that the card issuer stands ready and willing to bend me over the minute I carry a balance or slide past a payment deadline.

Therefore I take precautions to make reasonably sure that such things don't happen. And the "insufficient pricing information" never really enters the picture.

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