Tuesday, May 19

Sometimes You Could Almost Get The Impression That Some People Are Only In It For Themselves

Andrew Martin, "Credit Card Industry Aims to Profit From Sterling Payers". May 18

OKAY, I confess: I'm a Deadbeat, or rather, my Poor Wife is, as it's because of her our credit card bill gets paid every "month", wink wink, since the Credit Card Calendar month, which has been shrinking faster than my aged Mother, has reached twenty-five days, meaning one could now extrapolate to the point where the time required to print and mail a bill will exceed the billing period, and clocks, and major rivers, will begin running backwards. (This is the same sort of Perfect-Market-driven absurdity on display when the late great Stephen Jay Gould calculated the ETA of the weightless Hershey bar.) If the bills were left to my indolent ass there's an issuer out there who'd still be looking for the money for my first Betamax. I'll show you fucking Deadbeat, motherfucker. Just so we understand I'm not making a moral argument here, anymore than I expect all those public Catholics who just left South Bend with nothing to do to suddenly chime in on the Pope-endorsed evils of usury.

No, we're Deadbeats because over the past twenty years we've paid our bills on time, and our poor card issuer has been forced to subsist on merchant interchange fees, authorization fees, batch processing fees, monthly merchant account minimum charges, statement fees, early termination fees, chargeback fees, customer service fees, card insurance, and whatever they've earned, I mean "earned", selling my personal information to all comers. God knows it's been weighing on me heavily. Each month I half-expect to find an enclosed flyer, in Helvetica All Caps Extra Bold, announcing their upcoming Yard Sale.
Now Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit.

Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.

Y'know what? Bring it th' fuck on, motherfuckers. Let's see which of us can live without the other. I never asked for any goddam perks and I've never used any; take 'em away. The minute you try to charge me an annual fee I'll find someone else who won't, and the minute you charge me immediate interest the shredded pieces of the card come back to you.
The legislation scheduled for a Senate vote on Tuesday does not cap interest rates,

There's a shocker.
so banks can continue to lift them, albeit at a slower pace and with greater disclosure.

Y'know, back in the Old Days, when Republicans thought they had to pretend to care about working people in order to get votes, and when Democrats actually did care, to some extent, the "Conservative" tag line was "unintended consequences". Sure, we all want to help the underprivileged, but those unintended consequences keep tripping us up. You still see this sort of thing occasionally, in the words of Jonah Goldberg or other morons raised on the talking points of their parents' era. Of course at the time no one on the Anti-Fluoridation Right actually imagined they'd ever have to govern a country where a large percentage of the population was literate, and shit-throwing looked like one sweet, sweet neverending Ride. And now what we see are the intended consequences of Reaganism, the idea that a temporary electoral advantage could be gained with the help of Big Money, at a cost of allowing Big Money to go on the All-Lard Milkshake Freedom Diet it kept insisting it needed to grow bigger and stronger. And now--quel surprise!--it needs those 3500 calories per sip just to stay alive, and threatens to foul itself (again) unless we cough up.
“There will be one-size-fits-all pricing, and as a result, you’ll see the industry will be more egalitarian in terms of its revenue base,” said David Robertson, publisher of the Nilson Report, which tracks the credit card business.

People who routinely pay off their credit card balances have been enjoying the equivalent of a free ride, he said, because many have not had to pay an annual fee even as they collect points for air travel and other perks.

“Despite all the terrible things that have been said, you’re making out like a bandit,” he said. “That’s a third of credit card customers, 50 million people who have gotten a great deal.”

You're making out like a bandit! says fucking Calico Jack. I wanna see my bank try that one on as its new advertising slogan.
Robert Hammer, an industry consultant, said the legislation might have the broad effect of encouraging card issuers to become ever more reliant on fees from marginal customers as well as creditworthy cardholders — “deadbeats” in industry parlance, because they generate scant fee revenue.

“They aren’t charities. They have shareholders to report to,” he said, referring to banks and credit card companies. “Whatever is left in the model to work from, they will start to maneuver.”

Y'know, I'm pretty sure Citibank and Bank of America have had shareholders to report to all along. Though I suppose belated concern may be better than none, if you're desperate enough.
Banks used to give credit cards only to the best consumers and charge them a flat interest rate of about 20 percent and an annual fee. But with the relaxing of usury laws in some states, and the ready availability of credit scores in the late 1980s, banks began offering cards with a variety of different interest rates and fees, tying the pricing to the credit risk of the cardholder.

I'm a bit pressed for time, and my quick Google search didn't turn up a definitive answer, but I'm still calling bullshit based on what's left of my memory. I got my first credit card in the late 70s, and I might have paid an annual fee the first year, but no more than that. I will guarantee you that the annual interest rate was no more than 18%, which the most allowed under Indiana law at the time (that's another little lagniappe the usurers have been granted in the interim; the elimination of most of the troublesome state-by-state interest regulations), and my recollection is that it was actually something like 16%. In fact the argument in the early Reagan period was that with (artificially induced) double-digit interest rates our poor credit issuers couldn't make a dishonest buck; when rates plummeted again, and stayed low, no one asked for any comparable reduction, and I don't recall anybody junkmailing me an offer with one. Boy, today is just full of surprises, huh?
Austan Goolsbee, an economic adviser to President Obama, said that while the credit card industry had the right to make a reasonable profit as long as its contracts were in plain language and rule-breakers were held accountable, its current practices were akin to “a series of carjackings.”

“The card industry is giving the argument that if you didn’t want to be carjacked, why weren’t you locking your doors or taking a different road?” Mr. Goolsbee said.

Tell ya what, Mr. Goolsbee--wait, wasn't "Goolsbee" the third cartoon monster cereal spokesman, along with Frankenberry and Count Chocula? Goolsberry™, with Partly Decomposed Miniature Marshmallows?--uh, tell you what, sir, at this point I'll believe your boss when his ass is in the chair vetoing any legislation that doesn't include interest caps and the elimination of hidden fees. I could care less how he characterizes their extortion demands in the meantime.


Edward said...

Booberry. Best. Cereal. Ever.

I almost shed a tear for Big Credit, until your rant snapped me back to reality.

Uncle Omar said...

Those poor bastards...next thing you know they might have to reduce interest rates on savings to one half of one percent. What? They already have? I'll take mine in cash, please.

Doug said...

My recollection from a Frontline episode was that there was a Supreme Court decision in the late 70s, maybe early 80s, that decided if a credit card company was doing business in a state and signed up a customer in another state, the credit card's state laws could govern the agreement. From there, it was a race to the bottom as states tried to get credit card banks to locate in their area, and other state's usury laws became toothless.

Grace Nearing said...

the time required to print and mail a bill will exceed the billing period....Ah, my cable company has already accomplished this. Even more time-warping is the fact that the cable company bills a month in advance.

a different mikey said...

Thomas Geoghegan had an excellent analysis in Harper's on this subject, available at this URL:


I enjoyed his reasoning and almost found it persuasive. Highly recommended.

my word verification was revers and I'd expect Doghouse to be able to spell 'The Reivers' correctly.

Rugosa said...

I'm exactly the kind of person who needs this legislation (and more like it). I was a deadbeat until a period out of work left me with choices like no heat, or heating oil on the credit card. One trick I particularly like is the shifting due date - an account that has always closed on the 25th suddenly closes on the 18th and Hah hah! Loser! You get socked with a late fee and a rate hike. I've learned to monitor my accounts on line, pay online, and be quick to transfer to a lower rate when a company pulls shenanigans. (Do careful math - as long as the interest saved is more than the transfer fee, you win.)

R. Porrofatto said...

A credit card rate of 16% seems sensible when the Fed Funds rate is somewhere around, say 10%, a nice 60% profit for the banks for doing practically nothing. A credit card rate over 20% when even the Fed discount rate is somewhere between zero and a five-place decimal is an insane subsidy for mansion construction on the north shore of Long Island. I was also about to mention that article on interest rates in last month's Harper's, in which Goeghegan blames our willingness to dismantle "the most ancient of human laws, the law against usury, which had existed in some form in every civilization from the time of the Babylonian Empire to the end of Jimmy Carter’s term, and which had been so taken for granted that no one ever even mentioned it to us in law school" for a whole lot of the consequences we now bear.

I think my favorite moment in the recent hearings on abusive credit practices was not the insanity of universal default and all the other excuses the industry uses to steal easy money. It was the woman whose interest rate suddenly soared, despite her never having been late paying any bill to anyone, and even the congressional mavens on the industry were stumped. It turned out she had gotten one of those instant department store credit cards while shopping and the mere act of having another credit card allegedly made her a credit risk deserving of a whopping increase in her interest rate as a penalty, retroactive of course.

Colin Escherich said...

Awww, the poor credit card companies; let us all shed bitter tears. They make money even if you pay your balance in full every month! To the tune of about 3 percent! How? If you use your credit card to buy $49.95 worth of Chinese-made, lead-containing, cheap plastic crap from your local merchant, said merchant gets reimbursed $48.45 and the clearing house (Visa, MasterCard) and the bank get to pocket the difference. There are a few merchants around who will give you a 3 percent discount if you pay cash. For the rest, they are charging you at least 3 percent too much if you pay cash. Cheers!