WHAT’S THE NOTE ON THAT?

2/22/10

Today is the day that various credit card regulations, which passed Congress last year, go into effect. Without going into a lot of detail, the regulations block or obstruct banks and credit card companies from imposing fees, especially overcharge fees, on their customers. The regulations also require fuller disclosure, which would be a much better idea if consumers actually read their disclosure statements, and also generally make it more difficult for credit card issuers to, to use a technical term, screw their customers.

It’s awfully hard to defend the credit card issuers. There is little doubt that they have behaved immorally, or at least amorally, and reprehensibly. However, this is a classic case of it taking two to tango. Any consumer that feels taken advantage of can simply switch to another issuer, or, horrors, pay off his credit card and refrain from using it, reverting to the quaint old custom of saving money and paying cash when one wants to, to use a term the credit card companies use so elegantly and ubiquitously, “obtain” something.

What! Pay off one’s credit card! Why, that’s impossible, enlightened types might protest. However, it’s only impossible to pay off one’s credit card if one used that credit card to buy things one could not afford. And, while this might obnoxious to some, if you can’t pay cash for something, you can’t afford it, by definition, despite current wisdom that holds that you can afford something as long as you can make the payments on something.

Essentially, legislation like this, designed to rain retribution on those evil banks and credit card companies, does little more than make getting in over one’s head easier, unless, of course, the banks do what they threaten, and what would ultimately be the right thing, and pull back on credit card issuance. In all likelihood, though, banks will make unsecured lines of credit (i.e., credit cards) just as available but more expensive. And consumers will pay the fees because they simply “can’t live” without their credit cards. To a certain extent, this is true; one can’t rent a car or a hotel room, in many instances, without a credit card. But one can always pay cash, or use a debit card, for the hotel room or car that one has reserved with a credit card. Or one could simply use one’s card for convenience and reward points and, miracle of miracles, pay off one’s balance each month, thus converting a credit card to a charge card. Those who argue that such an approach to credit is impossible are wrong, of course. There are many of us who use our credit cards in just that manner. Those who defend constantly running balances, and thus exposing one to the tender mercies of the credit card companies one purports to loathe, will doubtless trot out someone who had to run up huge balances due to some medical or other emergency. There are indeed such people out there, but if all of our credit problems arose because of medical or other emergencies, we would have no credit problems; such folks make up a very small percentage of those in credit trouble. Most people who are in credit trouble are there through all the fault of their own.

It’s very popular to blame one’s credit problems on one’s creditors. But to do so is akin to blaming the train for one’s death when one lies down on the railroad tracks.