Tuesday, May 19, 2009

The Credit Experiment

Since the current financial crisis began, I have been vocally skeptical about claims coming from academics, industry men, and government about the pressing need to restore financial stability in order to make easy credit available to Americans. Apparently we need easy credit to live. This has fallen very strangely on my ears; it's sounded a lot like more of the same bullshit rhetoric about how the American economy is the be-all end-all of human welfare and enterprise. It has sounded like the same kind of attitude that led Bush to ask us all to go shopping after the September 11 attacks. It sounded false and more than a little condescending.

Well, I will confess something: I was being somewhat hypocritical in my skepticism. I had three credit cards, only one of which was frozen and unused*. I made frequent and liberal use of easy credit. I always reconciled this by telling myself that it was convenient, but that I could live without it. As it happens, I'll now get the opportunity to try.

Recently one of my credit cards, an Amex which was branded by the credit union I'd been a member of in Austin and which had always treated me right, with a low rate, a relatively high limit, and no funny business, sent me a letter informing me that they were raising my previously low rate by more than a hundred percent, to almost 25%. I was having none of this. I immediately canceled the card, rejecting the change and locking in my existing balance at the existing rate. I wrote it off as an irritating but minimal hardship of the failing economy.

Today, I received a nearly identical letter from my other active card, a Capital One Visa I've had for around ten years. They told me they were effectively doubling my rate, again to almost 25%. Once again, I was having none of it. This time, since this was my last credit card*, I decided to try to talk some sense into them. I picked up the phone and called customer service.

After surprisingly little runaround, I wound up connected to an "account specialist." The long and the short of it - and mostly the short because, for supposedly being the problem-solver guy who had the flexibility to negotiate, he had surprisingly little to say to me - was that as far as reasonable negotiations went, it was simply not going to happen. He told me that they could not not raise my rate and that there was nothing he could do for me. I politely explained how it would be a win-win if I got to keep my card and they got to keep my business, but he insisted that he simply couldn't stop my rate from going through the roof. I thanked him and asked him to close the account, and that was that. The greed and inflexibility of the company has cost them whatever they might have made off of me in the future, and since I pretty consistently carried a balance, that's not nothing.

Anyway, we arrive thereby at my current situation: I am credit-cardless. Oh, it's true, I do have that frozen one that I might break out in a life-or-death emergency*, but that stays locked away and I don't intend to take it out. I am putting my money where my mouth is - and since I do still have to eat, that's true in an uncomfortably literal way. I will conduct an experiment to determine whether Americans really do need easily available credit to live. I predict that my hypothesis - that they don't - will be soundly confirmed.

Lest I be accused of being unrepresentative, of being a child of privilege who doesn't have the needs of real Americans, allow me to list my qualifications:
  • Public sector job paying a wage substantially below the regional median
  • More than three thousand dollars in existing debt and upwards of fifteen thousand in student loans
  • Minimal savings (currently only... let's see, $55 available)
  • No other income or assets which might offset my poverty (e.g. trust funds, investments, etc.)
As you can see, I have my financial ducks in only the loosest, vaguest row (I do pay all my bills on time). Nevertheless, I contend that I can make this work - can, and will.

Credit card issuers are and have been, in the words of The Stranger's Jonathan Golob, "vile pigs." They have used the perceived necessity of easy lines of credit to entangle millions of Americans in terms and agreements that are simply outrageous - I have never seen a credit card agreement that didn't allow the issuer to raise rates, lower limits, charge fees, or penalize credit scores at will and without notice or reason. This has never sat well with me, and I admit to a certain juvenile satisfaction in - twice now in recent weeks - telling them exactly where they can shove their arbitrary rate hikes.

So that's my story. That's the experiment. We'll see just how it goes!

* - I applied for and got a Visa some time back for the express purpose of abusing their offer of an introductory 0% rate on balance transfers by transferring a balance from a card I had to it and paying the minimum for a year, buying myself an interest-free year. This has worked well so far but I have never used that card and I never intend to. The purchase rate is an atrocious 16%, and the backer is Bank of America, who I don't trust as far as I can spit. As soon as the transfer APR ends and I pay off the balance, I'm closing the account for good.

1 comment:

Ben said...

dooo eeeeeet!

It's not that hard. I did it for years. The only real issue is stuff like renting a car. The major risk is that if someone steals your debit card account, you're SOL; if someone steals your card and you report it stolen, you're not liable.