Charge It

Much hand-wringing is going on lately over the way credit card companies are currently abusing their clients with increased rates and service charges. I find this interesting, if not amusing, and offer the following thoughts on the subject:

The contract signed between the card issuer and the card holder is just that: a contract. And all contracts include various numbers, limitations, and fine print. That’s all well and good until we get to the “rates and fees are subject to change at any time” phrase which pretty much screws the card holder with no downside for the issuer. Tell me something: would you buy anything from anybody at any time that included this phrase? I sincerely doubt it. Buy a car on time (like most of us do) and then get a letter from the dealer saying their bottom line is suffering so your outstanding balance will be increased? Not on your life, but we’ve done that with the credit card companies and that has led us to our present predicament.

But the card issuers are swimming in red ink as more and more of their customers default on charges that can no longer be paid as jobs are lost and homes are foreclosed upon. So what can they do? They can call in their marker from the applications everyone signed and raise their rates and fees unilaterally. Maybe if they had been a little more conscientious in doling out their cards, they wouldn’t be in this mess, but with that caveat of unrestricted increases, where’s the risk?

The existing contract we all sign is crap, has been crap, and will continue to be crap until the above-mentioned phraseology is eliminated. The new, improved application would simply state the rate for purchases and a list of associated fees. And should the issuers want to change those rates, they can do so, but the new rate does not apply to old charges. Additionally, minimum payments and late fees remain unchanged because the charges were incurred under those understandings. This is called a Grandfather clause, of sorts, and has become all too rare in the marketplace.

When I became an officer in the Air Force, I was told that I had a substantial sum of money available to me through the GI Bill. I could use it for flight training, among other things, and there was no time limit for me to take advantage of this program. The GI Bill was a recruitment tool at the very least and provided a means to a furthering of education for members of the armed forces. At some point further down the road (circa early 1980’s), the rules were changed and now we had to use up our allotted funds before a certain point in time. Everybody fell under this new mandate: old farts to young pups barely out of boot camp. And it wasn’t right or fair. Absent a Grandfather clause, I lost a good bit of what was earlier promised to me.

So now the government is expecting credit card companies to act in a manner the government has been unwilling to adopt. Nothing new in the “do as I say, not as I do” expectation, but it still strikes me as the quintessential irony. While I applaud the long overdue recognition of a wildly unbalanced contractual item, I wonder if there is something you and I can do on our own to stymie those that offer plastic as a panacea.

How about tearing up your credit card? No, not a cold-turkey kind of thing, but a “taking-your-business elsewhere” statement that deprives a bad business partner of your future business. This is called supply and demand and, should our demand for a fairer agreement (that includes a Grandfather clause) become loud enough, one can bet that there will be a credit card company offering such a vehicle. In the meantime, keep in mind that we all signed this deal and should expect to abide by it. Let’s just vow to avoid making the same mistake in the future, OK?