In an age of instant gratification, overlooking the more subtle implications of credit cards in favor of more desirable ones is all too easy. Why worry about your 21% APR when you’re about to throw on a brand new pair of jeans and the balance on your checking account is still at four figures?
After all, it’s practically free money – in fact, you’re probably making money, if you factor in the 30% you saved on your purchase. Or at least, that’s the perception.
We see credit the way it’s marketed to us: a quick fix, an opportunity, an exclusive club. Negative insinuations don’t enter the picture until it’s far too late for consumers to make amends, and never once do lenders acknowledge that essentially, they sell debt.
With their most recent print campaign, American Express is working to change that perception. Their tagline, “Take charge, don’t take chances” is certainly a step forward for the industry and a leap forward from “Are You a Cardmember?” However, as one of a million former idealists made pessimistic by the bleak economic situation, I have to ask: where did this sudden initiative come from? I’m inclined to believe that the 39% drop in the number of credit cards issued this year had more to do with it than a surge in corporate compassion.
Perhaps consumers and lenders should both begin to treat credit cards as they would a business transaction. Young professionals, even college interns, would never treat their clients’ money with the same frivolity that they do their own. When working with a media buy, I ensure that every cent of our clients’ money is accounted for. Every time money is moved, I make sure to leave a paper trail – and yet I rarely take my own gas receipts from the pump.
At the other end of the spectrum, not even the most junior employee of a company issuing loans would agree to a business transaction without being thoroughly taken through every term and condition. A close friend works in the loans department of a national bank and although she knows the paperwork inside and out, when acquiring a loan herself she would refuse to put pen to paper without being made familiar with every line in the agreement.
I’m not by any means suggesting that creditors announce outrageous interest rates on a national TV spot, but I do think that credit card companies should actively make customers aware of what they’re agreeing to. They may be offered an initial interest rate of 0%, but how much will that increase if a payment is late? I doubt that honesty would lose them any customers – and it may even get more people to pay their bills.
We shop smarter today than five years ago; we scour the Internet for consumer reviews, follow airlines on Twitter so we never miss a “tware”, and we’re on more store e-mail lists than we can count. But somehow, managing our credit is a concept that continues to evade many of us. Maybe we’ll get a little help along the way – or maybe it’s something that comes hand-in-hand with a lifetime of Visa?
Image: Andres Rueda
I don’t have a credit card and never did have one. It is probably the best choice I have ever made.
I think education about how to responsibly use a credit card is necessary. This should either be done through part of the “growing up” process by parents (mine helped me get my 1st credit card, and educated me about how to use it and the ramifications of not paying off a balance, being late on a payment, etc. along the way), or in schools.
I think responsible use of debt (loans, credit cards, etc) is a good thing, though I find many of my generation see credit cards and loans as “free money”, which is not the case.
Contrary to the above poster, I do have a credit card and think that’s one of the best choices I’ve ever made.
I believe having credit cards is a necessity in this day in age. What would you do if you needed to make a purchase that was larger than expected? I think everyone should have one, if not for the flexibility it provides, then just for emergency purposes. As long as you are smart and reliable with paying off your balance every month there is no harm. I have never once had to make an interest payment because I make sure that I pay every bill at least a week before it is due. Before I make a purchase on my credit card I make sure that when the bill comes I will be able to pay it off. If not, I don’t make the purchase. It’s all about planning. The benefits of having the card (discounts, points, miles, etc) are worth my time needed to create reminders on my calendar this way I never forget to pay it off every single month.
Kim says it all when it comes to having a credit card, especially when you find yourself stuck on the highway and needing to pay for a new tire.
There is more at stake than just the debt of the individual but the debt of our nation. Yesterday I was rudely awaken by the video I.O.U.S.A. You have got to watch it.
The problem that I have with managing my credit boils down to–”out of sight, out of mind.” Unlike cash or a check book, or even a debit card, there is no easy way that I have to keep track of what I’m spending with my credit card. Typically, half way through the month I just forget what I spent at the beginning. It’s not a cartography, but it does lead to bigger bills than I’d like sometimes. Keeping receipts is something I’ve done in the past, but it’s very easy to fall off that horse when it means the end of your day involves data entry. I think I’m going to try out Mint very soon to try and get things a little more under control.
Jason, Mint is one of the ways I keep track. I would recommend it and enable it to email you updates. I got one that other day telling me that I had “usual shopping habits this month” which could mean one of two things 1) someone could have stolen my card and been racking up spending or 2) I went Christmas shopping on Black Friday… Luckily, it was 2.
I’ve also never owned a credit card, so I’ve never had to deal with the headaches of diligently keeping track of all of my receipts or suffer the consequences of late payments, but it’s a double-edged sword. Applying for a loan for a new car, or heck, even a low-interest credit card to start out my plastic-payment career is going to be nearly impossible because of my lack of a credit score.
I’m with the people who think credit cards are good. But, and it’s a big but, long term debt is almost always bad. In other words, if you charge some things, but then pay down the balance as fast you can, find, but if you let your debts pile up, watch out. The landing is always hard.
Sadly, as a country we are saying Debt Is Good. I mean, we are now over $12 trillion dollars in debt. Think about how much money that is: a million is a thousand thousand, a billion is a thousand million, and a trillion is a thousand billion. It defies the imagination, which is part of the problem, we just can grasp in our minds how much we owe as a nation. But owe we do, and what one owes one must pay back. And it can get away from you so easily, as it has for the country and for individuals. What to do? On an individual basis, pay your balance. Nationally, vote for politicians who don’t treat debt so casually. $12 trillion and no one seems to mind. Insanity.
Jeff
http://www.cerebellumblues.com
The only credit card I’ve had, I shared with my father. I paid for things on it, and he covered the costs for a few years, helping me build a good credit report so I could be free to make a big purchase one day. But now that I operate on such a low budget, using a credit card would be crazy–I used online banking and keep track of my money on a day to day basis…seeing money in the bank that isn’t actually free for spending would confuse me.
I do understand the benefits of credit cards, and of building good credit. Once I’m making steady money, I’ll probably start using a card again, and pay it off with my own earnings. For now, though, count me out.
I think education about how to responsibly use a credit card is necessary. This should either be done through part of the “growing up” process by parents (mine helped me get my 1st credit card, and educated me about how to use it and the ramifications of not paying off a balance, being late on a payment, etc. along the way), or in schools.
I think responsible use of debt (loans, credit cards, etc) is a good thing, though I find many of my generation see credit cards and loans as “free money”, which is not the case.
Contrary to the above poster, I do have a credit card and think that's one of the best choices I've ever made.