Credit Card Cabal
Tuesday, August 5th, 2008 By James Nesbitt
Steve Wartenberg of the Columbus Dispatch reports today on angry Ohioans demanding that the Federal Reserve change the ways credit card companies are allowed to operate. Here are just a few of our angry fellow citizens’ comments:
“It is unfair that the credit-card companies can arbitrarily raise your interest rate to above what has been normally considered unfair/excessive even if you have not missed a payment.”
Hilary Marhover of Worthington wrote about how her fixed rate was “increased for no reason to 20.99 percent” even though she never missed a payment. “This is an unfair practice and should never be allowed.”
“Just had a credit card jump my APR from 9.9 to 25.19 because I was two days late in sending pymt, that was in addition to $39 late charge.”
What is unfair about a credit card company charging and raising rates? It is providing a service to customers and loaning those customers money that could otherwise be invested. The money used and owed is not the customer’s, but the company’s. When other investment opportunities offer better returns for its money, the company raises rates. The alternative is for it to invest in other areas, leaving consumers without the service they so enjoy. When that loaned money is not returned on time, it creates problems for the company that was expecting to have it back for other pursuits. Additionally, companies that raise rates and charge fees follow a protocol stated in writing and agreed to in advance by the customer. If these agreements are too complicated for customers to comprehend, customers should not agree to them in the first place. Assuming the company wants customers, it would accordingly simplify its agreements to attract more of them.
So what has caused all this outrage? Well, to put it purely and simply, irresponsibility on the part of consumers. While Ohioans clamor for the Fed to protect them from these “Mafia loan-shark” companies, they forget or ignore a few things about the system. Firstly, they have agreed to use a credit card and accept a complicated agreement and the risks that come with it because that card offers them a convenient service. Government regulations have a history of making these services less convenient. Secondly, this service is not mandatory. If customers are unable to use credit responsibly, they are free to stick with cash or other means of payment that matches their level of responsibility. Thirdly, their problems are entirely of their own creation. Had they handled this convenient service responsibly in the first place, they would not have credit card debt. Believe it or not, there are some people in Ohio that enjoy the convenience of credit cards quite frequently yet have never made an interest payment on that use. I know that because I am one of those (apparently few) Ohioans. The Ohioans who don’t are misplacing the blame for their own poor choices on credit card companies in the hope that their neighbors (as U.S. taxpayers) will bail them out. If anything, it shows that they have not yet learned the lesson of responsibility.
Tags: responsibility
