Tuesday, May 26, 2009

Here's a question

This is something that's bugged me since late last week.

What would it do to a person's credit rating were they to cancel all their credit cards? I don't mean because there's an outstanding balance, or because of bankruptcy, or something like that. But because the rules got changed and someone who WAS responsible winds up having to pay to use the card even if they pay it off in full each month.

Because I am one of those folks the credit card companies like to call a "deadbeat." (Nice bearded-Spock universe that one comes from: the term is used to refer to credit card customers who pay off their bills IN FULL and ON TIME each month. I am totally anal about that - I have never had a late bill, even if it meant calling the credit card company before I went on vacation to find out my balance and sending a check to them early, before the bill came).

But now, the lovely new legislation designed to save people who put that trip to Bermuda or those Jimmy Choos on plastic when they didn't, you know, actually have the money to pay for them - and when they'd never have the money to actually pay for them is coming down the pike.

And it looks ugly, folks.

Okay, an up-front disclaimer: I know people have emergencies. I know someone who actually put medical bills on a credit card because he knew there was no way his health insurance would cover the particular (experimental) treatment. And that it's going to take him a long time to pay it off. But he didn't have time to try to find alternative sources for paying, and that seemed the best thing to do at the time. And I don't think this guy would ever default; he'll just be under the heavy burden of high interest rates for a while. I don't get grumpy at the people who have real emergencies where the credit card may be the best, or the only solution.

But once again, it comes down to irresponsibility. I knew people in college who got credit cards (I was not allowed to have one [by my parents] until I was 21) and who bought all kinds of junk, new stereo systems, video games, all kinds of stuff they didn't remotely have the money for. Their justification? "I'll have the money someday, when I get a job." or "If worse comes to worse, I can declare bankruptcy."

No. NO NO NO NO NO. Bankruptcy is for real emergencies - like health emergencies, or loss of a job followed by inability to get another job while also trying to pay all your bills. It is not to be considered because you want stuff now.

So it's people like that - who've gone crying about how they're so mistreated - that now the government's reining in the credit card companies.

And while I admit some of the things are not such a bad idea (no credit cards for under-21s unless they can prove they can pay, for example), it looks like the credit card companies are going to whack those of us so-called "deadbeats" because they now have to be "nicer" to people who haven't used the cards responsibly.

Two possibilities seem to be an annual fee (which I could deal with provided it was not enormous; I think my first credit card, because it WAS my first, carried a $40 annual fee) and no grace period.

I really, really do not like that second possibility. What it means is, every purchase you make, you start being charged interest from the moment of purchase. The only way to avoid it (and you probably couldn't even then) would be to send in a check for the purchase amount the very day you made it - essentially removing one of the big conveniences of these cards.

It's not like interest is the only way cards can make money. I was talking this over with a small merchant (a quilt shop owner) in my parents' town and she said she sent off $600 in fees for TAKING credit cards to the companies (I don't remember if she said last month, or last year. She does a considerable business but $600 a month seems like a lot; it may have been last year). And every business owner who takes cards would be paying.

She agreed with me - that if the cards went to "interest from date of purchase," she was cancelling hers. (She is no fan of Obama, I learned from the conversation).

So this raises the questions:

1. What WOULD it do to a person's credit rating, if that person (say, me) was to pay off all her cards in full that last month, not charge anything else, write the issuers and say, "Your decision to charge interest from the moment of purchase is unacceptable to me; please close my account." Would having no credit cards make it harder for me to take out a loan if I really needed one? That's one thing that scares me a little.

2. How would a person travel? Deal with emergencies? I've run up against a lot of businesses that won't take checks any more - I guess they've been burned too many times by bad checks. How would I order train or plane tickets without going through a travel agency and paying them by check? What if my car breaks down when I'm 300 miles from home and the only repair shops won't take checks, and I have no cash?

3. Are debit cards really that unsafe? I mentioned to my dad, "Well, I'll just close out the credit cards and get a debit card then" and his response was that if you lost the card, or if it was stolen, you were screwed - someone could empty your account.

4. I really, really don't want to give up being able to use Amazon. Or Etsy. Or any of the many on-line craft-supply sellers I buy from. It makes me sad to think of losing what is really pretty much my only "fun" shopping (short of driving an hour's round trip) because of some IDIOT who claimed they couldn't understand the fine print and the credit card companies "screwed them over" when they were actually buying luxury items they could not afford.

5. Will other people give up their credit cards if the "interest from date of purchase" or if exorbitant annual fees come into place, or is it just a few cranks like me? Because if it's a lot of people, then online merchants could be hurt - and they could come back at the credit card companies - and maybe things would change. But if a lot of people just shrug and go, "meh, cost of doing business" or if they even go "Well, it's OK because that means the credit card companies are being controlled" then those of us who choose to opt out are kind of screwed.

6. I wonder if armed robberies in shopping areas will go up, if the crooks figure that people are carrying big amounts of cash to avoid using cards. The big reason I use credit cards is so I don't have to carry a couple hundred dollars of money in my purse if I'm going clothes-shopping and school-supply shopping and grocery-shopping and stuff all in the same trip (Which I usually HAVE to, because there's almost nothing in my little town aside from Wal-mart, so if I want to do "big" shopping I have to bunch my trips and drive the hour's round trip to the next largest town)

I realize I'm "borrowing trouble" (to use my dad's phrase) here, but I want to be able to plan. I want to be sure to order all the stuff I could want - to go on one last big buying spree - before paying off the cards and then cutting them up. (And then going, as I said some months back, "Laura Ingalls" - where I buy nothing but the necessities, where I opt out as much as possible from the consumer culture. Not because there's anything so wrong with IT, but because the government has made it undesirable to me to shop.)


Dave E. said...

I pretty much only use my Wells Fargo/Visa check card these days. They have a fraud alert program and if you promptly report fraud they say you are not liable. I check my balance and transactions every few days and guess that's probably good enough. I'm not sure how well you can use them for stuff like lodging these days though. You might need a regular Visa card or some such for that, I don't know.

A few years ago I had a major truck repair bill, like two grand. I called the toll free number and asked if I could put it on the check card. I had the money and to my amazement, they said sure. It stung, but I prefer that pay as I go method. The clerk was pretty dubious about running a bill that size on a check card, but it went through. I like to use it much more than my standard Visa card.

The Fifth String said...

This irritates me. I'm another "pay it off every month" person just about to get screwed on behalf of the irresponsible.

I can't say about the debit cards, I've heard both ways (very dangerous, or not). No idea. Ann Althouse (I think it was) had something about this subject recently.

Mr. Bingley said...

I'm with ya, sister. This really ticks me off. And the card companies do get paid something like 1% of everything your charge by the merchant (amex charges them 1.5-2%, which is why fewer places take amex), so they simply want to make more money off of us folks who pay our bills.