Money Monday: March 8, 2010

Well, it finally went into effect last month: The CARD Act, restricting the ways by which credit cards can gouge money out of the consumer.

I am going to tell you guys something right here and now: This does not end the madness. Not by a long shot.

What it will do is end some of the current sneaky practices. Things like shifting your due date around on you, applying your payments to the lowest interest balances first while the highest interest things lag behind, changing what interest rate you pay after you’ve made the charge.

What it will not do is magically cause the card issuers to decide to be altruistic saints whose sole purpose is to provide free money for the deserving masses, so that they can continue buying all the stuff they want but can’t technically afford for a low, low monthly payment ad infinitum.

There is only one way to make a credit card issuer play nice with us: Whenever they did something we didn’t think was right, we would have to stop using their service.

If we all stood up for our rights that way, I tell you what, those disgusting practices would end in a heartbeat.

But of course, that would be…hard. Try going a month without using a credit card for anything.

For those of us who haven’t been doing that for a long time already, it’s really, really hard.

For those of us who rely on them to fund a lifestyle we can’t afford in the first place, it’s not just hard – it’s impossible. (Which makes this an excellent experiment to discover if you are actually living well above your means in a lovely state of absolute denial about it. You laugh, but you’d be amazed how many of us are…and counting on the annual tax refund or bonus check to make it alllllllll ooooookayyyyyy…)

It’s a bit amazing, really, how dependent we have become on credit cards. Think about what they are: An unsecured loan, with random, highly-changeable terms, gotten for nothing more than our signature and a scan of notoriously inaccurate credit reports, with terms and lines based on the FICO score which, and again I tell you this from sort of within the industry, everybody has known for years was a flawed, easily-gamed system.

The massive increase in credit card usage and debt has created a fascinating web, hasn’t it? I know people who worry more about their FICO score than their retirement funds. I’ve sat a table and listened to people talk about how to ‘game’ the system, what you “should” and “should not” do in order to have a higher FICO score…it fascinates me, because many times the advice given out with the words, “Dude, this will totally boost your FICO, like, through the roof!” is exactly the wrong thing to do if you want to achieve fiscal health…which of course the FICO is supposed to be measuring…

…wait, was that the March Hare that just dashed by…?

People care soooooo much about making sure they take good care of their credit cards – their unsecured loans with which they purchase everything from lattes to surgery – that they will choose making payments to those over paying their mortgages.

Yes way.

The credit card has become not only the emergency fund, but the ready-cash pool. People rely on them to pay for everything, which means, of course, that they not only have got us by the old nose-ring but convinced us to put the dumb thing in there in the first place. Here, we’ll give you a t-shirt if you’ll jab this thing through your nose! OK, great! And now we’ll just grab that sucker and c’mon, Bossy, it’s time for your milking…

We feel, by and large, pretty helpless in all this. They have the power. They set the rates. They tell us what we will or will not have. They determine our lifestyle.

But it isn’t really true.

We’ve let them do that. By becoming a society utterly dependent on slips of plastic for everything from the food on the table to the shirt on our back, we’ve handed off the power of choice to a business that exists for one reason and one reason only: To make profits.

Good idea? Not so much.

But our greed is more powerful than our common sense, sometimes. We want it all, and we want it now…so we’re more than willing to hand power over our lives to these companies in order to have what we want immediately, rather than having to go through the tedious process of earning the money, and saving the money, and managing the money, and waiting until there’s enough money…don’t care what the terms are, just give me the stuff, baby…

If we want reform, it has to start there, within each and every one of us. We have to look at the deal we’re signing, really look at it, and at what we’re getting in exchange, and decide if we’re happy with what we’re getting at the end of the day.

If we’re not, we don’t need more legislation and a constant battle of wits between Congress and the MegaBank pencil-pushers (believe me, Congress doesn’t stand a chance there).

What we need to do is just say no. Firmly, calmly, and backed up by a lovely inaction – a refusal to use the blasted cards in the first place.

We do that, and answer truthfully when they ask why (which they will, and quickly), and they will trip all over themselves to give us what we want.

Because we’re not just their bread and butter – we’re their meat and mayo, too. Without our eager use of their goods and services, they’ll go hungry.

Truth be told, without us…they’ve got nothing. If credit cards were gone tomorrow, who really suffers more? The issuers, or us?

It may sting at first, and for some of us used to relying on those cards for basic necessities the adjustment would be hard…but we’d all survive. We’d adapt, and move forward.

The issuers, on the other hand, from the MegaBanks to the tiny credit unions, would find themselves sinking like rocks.

It’s high time we all remembered that, and put the power – and responsibility – back where it belongs: In our hands.