Tuesday, June 1, 2010

I Steal From the Poor, and You Can Too!

My wife and I have one credit card between the two of us. We have one other fallback card in the event something goes wrong with the first one, but 95% of our day to day expenses get slapped onto plastic. I use it for gas. For getting a soda at Sebbin Lebbin. For groceries. For pretty much everything.

Then, at the end of the month, we pay it off. Every last dime. In the nearly 20 years we've been a joint socioeconomic unit, we've paid credit card interest precisely twice, and that was just because we'd flaked out on paying the bill on time. We don't use our "credit." We just use it to make life a little easier. That's largely because incurring debt at obscene, usurious interest rates for day-to-day expenses is worth steering away from. And yeah, it is usurious. When bank CDs are paying out 2%, mortgage rates stand at around 5%, and interest rates for credit card debt are between 10 and 20%, that's taking advantage.

Here's the thing that gnawed at me this week. Our primary credit card is a "benefits" card, meaning we get a small percentage of our costs returned to us in the form of gift cards at a range of different retailers. Because all of our household expenses are channelled through this one card, that starts to add up, to the tune of several hundred dollars a year of free stuff.

Only, like most things in life, it isn't really free. Those benefits are, for most human beings, the thing that makes them look at a credit card bill that significantly exceeds their monthly income and say, "Awesome! Now I can get a $50 gift certificate to buy even more crap I don't need!" Those people ultimately get punished economically. They tend to be less educated, or young, or struggling.

So as I looked at the nice little benefits balance that's build up for us over the last few months, my reveries about new speakers or a nav system for our van were interrupted by the pesky voice of the Spirit. Where does the money that makes those benefits possible come from?

It comes from the single mom who maxed out her cards a year ago when her son broke his arm. It comes from the twenty something who dug himself into hock trying to live the lifestyle the world told him was his birthright, and now lives in mom and dad's basement while climbing a Sisyphian mountain of credit card debt, school loans, and a loan for that Camaro he thought might get girls to notice him. It comes from that family that two years ago went from two incomes to one, saddled with a mortgage they could no longer afford, with their savings burned through and plastic the last, razor wire rope slipping through their hands to as their hopes for the "good life" sail away into the darkness.

Those benefits aren't just given because I'm such a great customer. They're a tiny shaving off the top of a giant mountain of profit, repackaged as a little taster offered up by your local pusher. Enjoying them without falling into debt may well be my cut for being wise as a serpent. But for some reason, I no longer feel as innocent as a dove.


  1. If it makes you feel any better, your credit card rewards are actually paid directly by the merchants who sell you your goods. That results in higher prices for everyone, of course, as the merchants have to pass on that expense as well, but that means that the expense is born by everyone who buys anything, and not just the poor saps who are in hock up to their hatbrims.

    Paying your bill on time though doesn't help them. In the parlance of the CC companies, you are a "freeloader" (and so am I) because your account actually loses them money every month. They keep you on only because they are betting that eventually you'll screw up or need to coast with a balance long enough that they can finally make up their investment in you. In the meantime, the debtors are paying for the infrastructure that allows you to keeping using the card -- the cost of keeping your records basically.

    One thing you could do is to switch to a cash rewards card, and then donate the proceeds to a soup kitchen. Or perhaps a charity devoted to helping people get out of debt.

    That's a good idea actually. I may do that myself.

    I keep thinking of "The poor are always with us." How does that fit in?

  2. Unless, of course, you're paying 2% in higher retail prices for the luxury of using a credit card, and you get 1% back in credit card 'rewards.' In that case, you're unwittingly impoverishing yourself.

  3. [Next time, I'll refresh before posting.]

  4. @ Browning/Newworld: It...well...doesn't help particularly, though thanks for the clarification. Whichever way, folks lose out.

    @ Browning: Freeloading is the way to go. They keep bumping up our maximum, but we keep not taking the bait. Perhaps that's the way to defy their obscene profit margins.

  5. Tangential to this topic: For all our capital-driven consumption, we Americans are terrible at negotiating price. Most of us just pay what's on the sticker (unless it involves a mortgage or car note). I've never seen anyone offer to pay 5% less for a coffee at Starbucks, and frankly if they did, the folks behind the counter wouldn't know what to do.

  6. @ newworld: When we all think we can negotiate every purchase, lines at the local Walmart are going to get a whole heck of a lot more annoying.

  7. Isn't it curious that in many places around the world if one refuses to haggle about the price it is considered and insult? The haggling is an important part of living the those cultures, a way of establishing or continuing a relationship. I wonder how folks who move to the US deal with the fact that prices are set and there is no haggling?

    Hey, maybe we could all haggle with our credit card companies about the interest rate! Biblicaly speaking the rate of interest on credit cards is obscene. And from a cultural point of view the interest rate is like what the Mafia would charge.

  8. Perhaps such an inconvenience would actually shorten lines and reduce wanton consumerism. This no hassle format we're used to is surely a double-edged sword.