Confession of a Credit Card DeadbeatPosted on May 19th, 2009 6 comments
The roiling economy has uncomfortably squeezed the profits of various huge financial mega-corporations. As the bottom-of-the-barrel customers are no longer able to honor their obligations, the fatty underbelly of fees and interest which the poorest consumers have struggled to pay is suddenly looking a little lean. To make back their profits, the credit card companies are looking to eliminate the cash-back and frequent flier miles, reduce or rescind interest grace periods, and reinstate annual fees.
There’s no way this could backfire.
An amusingly twisted word in the credit card parlance is “deadbeats”. Counter-intuitively, these companies use that term to describe their very best customers. Do you pay your card off in full every month? Do you rarely, if ever, accrue interest or late fees? Do you regularly cash in your frequent flier miles and cash-back bonus? Yes? Well, since you don’t make much money for them, they don’t like you. They tolerate you, but you’re gaming the system, getting a free ride. You’re a deadbeat.
It’s nice to know what they really think of you.
Don’t weep, though. They still make plenty of money from customers like me. Every time we use our cards, the merchant is charged hefty fees for privilege of accepting our card of choice. We don’t pay that directly, but we pay it indirectly through higher prices in restaurants, shops, and online.
But it’s not enough, so they’re coming after the good customers. Ironically, they’re coming after the customers who need them least. I admit it: I am a credit card deadbeat. And if I suddenly have to pay an annual fee or lose my grace period, what incentive do I have just to not carry cash? I will happily abandon the credit card companies, tossing their aggressive advertising, obnoxious phone calls, and invasive behavior tracking right along with their annual fees and interest rates. And good riddance!
And, assuming I’m not the only one happy to return to legal tender, then the credit card companies are sowing the seeds of their own doom. As their best customers jump ship, their balance sheets will be left a ghetto of poor credit customers. As losses mount from those who can no longer pay, the ratio of good assets to bad will finally topple the once-mighty giants of consumer finance.
This is a great post, and how true it is.
You know, Ralph Nader doesn’t have credit and only carries cash. As long as you’re not planning to run for president, I don’t see how returning to “legal tender” could hurt you!
Or, use debit cards. Not everything requires a rebellious return to barbarism =P
Realistically if one CC bank starts adding fees, you can just switch to another one. This happened to me a decade ago with Cap one. As you indicated in your post, there’s still money to be made in transaction fees. There will always be “free” credit cards.
I agree D-cards aren’t as attractive or carefree as a good C-card. But if I could not have a free credit card I would find the use of a debit card far more convenient than being required to use cash and (god help us) checks for everything.*
If I want to make a big purchase, I could transfer money to the checking account online, then go right to Best Buy or whatever. No stop to the bank.
I never knew the drafting limit (lack of credit) was marketed as a feature. That’s retarded. Using a D-card without knowing there’s enough money in your account is in the same league of Stupid as not paying your credit card balance every month.
* Every time I see some lady at Meijer buying 13 dollars of stuff at checkout and pulling out a checkbook to pay for it, it makes me SO ANGRY. I am not a patient man.
We switched to cash for all in-person transactions late last fall and it’s been great. It’s much easier to keep a budget and you’re that much less likely to spend the money as your roll shrinks…
Just a thought Brian (and kinda tangential to your post), if you do want to look back at the debit option:
Paypal debit has none of the overdraft problems that my old Key Bank DC did: I don’t have the money, the card is rejected outright — PP doesn’t assess any fee and I can just return the purchases to the shelf (or whip out a CC if I’m in serious need).
On the down side, the bank takes *as long as is legally permissible* to transfer money from my bank account to my PayPal card.