I promised I’d report on the outcome of that credit card loan I took out last June to pay for paving our driveway. Here it is. Today I used our tax refund to finally pay off the loan completely. A couple of months early. The original terms were that I had a year to pay it off, and I paid 3% on the loan amount up front as a loan fee, and nothing more. It seemed like a good deal at the time, far easier than applying for a home equity loan. And technically, it has proven to be one. But after almost losing the terms in August because the post office supposedly took ten days to deliver my payment, thus putting me in default, I got scared. Sure, I cleared it all up with the credit card company. And I switched to online payments to better control the official payment arrival date. I can't see paying for Express Mail or some other extra delivery confirmation service when I don't believe the post office delivered my payment late in the first place. But that experience brought home yet again what a slippery slope credit card indebtedness is.
The problem is that the credit card company has the legal right to change the terms on me unilaterally and at any moment. At best, that’s like having an intimate relationship with a schizophrenic, in the old sense of the term, a split personality. You just never know who will show up this month, Dr. Jekyll or Mr. Hyde. I have seen with my own eyes credit card bills with finance charges of 67%. (Not mine, but still absolutely frightening.) What’s to stop any of my credit card companies from deciding that’s my rate? Nothing, absolutely nothing. Oh, sure, Congress passed a law that’s supposed to improve this situation. But it goes into effect next year. We all have to live through this year first.
Maybe competition is what keeps credit card companies somewhat in line. If I am deemed a credit-worthy person by another card company, one that is willing to give me a better deal, then my current company has to decide whether to push me away by being as nasty as possible, or to retain me as a customer by being nice to me. But I haven’t seen a whole lot of nice lately, have you?
No, I must be fair. This same credit card company is now showering me with offers of balance transfers at 0% interest. That’s right, free. A great offer, but I don’t owe any more money. Why do these offers always come in when I don’t need them? Are they supposed to tempt me into going back into debt? But how could my credit card company know that I would pay off my loan so early? Perhaps the company wanted me to add to my indebtedness, and possibly lose my current, low interest rate in the process? If so, that’s evil.
In the past, I have called various of my credit card companies to try to negotiate better terms. Sometimes they have cooperated. But some companies, even when I explained that if they couldn’t give me a better rate, I would balance transfer my indebtedness to them to some other company…well, some companies just did not care if they lost my business. That’s why, when the companies are kissing up to me, I take it with a large grain of salt. Sure they care. I’m just another 16-digit number to them.
Of course in this period of economic crisis, if you don’t use your credit card, the bank might close it down or reduce your available credit to less than plane fare to the coast. And if you do use your card and carry a balance, the bank might reduce your credit limit to $5 over what you currently owe. So you can’t fly anywhere. And on and on; we’ve all heard of versions of banks getting goofy over credit card accounts lately. That’s why a perfect payment record is so important to protect. It’s your only way to fight back when the cards are stacked against you.
That, and paying cash. But we don’t live in a cash economy anymore and I doubt if we will go back to one. Sure, I could write checks at some stores. But the gas station wants a credit card or cash. The line to pay cash is often long, since I’d have to wait behind people buying lottery tickets, fast food, and cigarettes, and who wants to stand in line? I might end up with a lottery ticket I don’t need. So at best I could play mix and match, paying cash, writing checks, and charging on my credit card. That becomes a lot to keep track of, though. Maybe I wouldn’t let anything slip through the cracks, but it would be work. Just using a credit card is so much simpler. It’s the payment process that seems to have become so fraught with danger.
Does my adventure in 21st century credit card indebtedness have a moral to the story? Not really. Am I glad it’s over? Very. Am I thinking ahead to the next time I might be tempted to charge a major expense to a credit card? Yes. I don’t plan to cave in to the temptation. Sure, it’s easy money. But it’s hard debt.