When I was much younger, small-town banks would, upon the request of a good customer, issue a line of credit. If you tapped it, they would charge interest on the amount you tapped until you paid it back.
Later, after almost every small-town bank was sold to a regional or “national” bank, doing the paperwork and interviews for lines of credit apparently became too much of a bother, and the bankers would tell you to apply for one of “their” Visa or Mastercard credit cards.
No longer dealing with a banker you knew and (more or less) trusted, you now had a “relationship” with a faceless call center buffer zone between you and a squad of bean counters who introduced an annual fee for continuing to “enjoy” your plastic line of credit. They raised the interest rate to whatever they wanted, LIBOR and the Fed rate be damned. If you wanted to use your line of credit to give yourself some traveling cash, they charged you instant interest at a much higher rate than if you used your plastic card to buy something directly. And if you were experiencing hard financial times and couldn’t pay off all of your bills within a given month, the faceless bean counters loved lashing you with “finance charges.”
Really, absolutely the only reason to carry around one of these plastic lines of credit stems from the fact that you can purchase things over the course of a month’s time and pay them off at the end of a month while obtaining a bill that itemizes your expenses.
But now the geniuses at the banks are preparing to do away with that lone convenience:
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.
“It will be a different business,” said Edward L. Yingling, the chief executive of the American Bankers Association, which has been lobbying Congress for more lenient legislation on behalf of the nation’s biggest banks. “Those that manage their credit well will in some degree subsidize those that have credit problems.”
As they thin their ranks of risky cardholders to deal with an economic downturn, major banks including American Express, Citigroup, Bank of America and a long list of others have already begun to raise interest rates, and some have set their sights on consumers who pay their bills on time.
I hate to be indelicate, but Edward L. Yingling can kiss my ass. During the first minute after receiving a notice that I’m going to be charged immediate interest for using my credit card to buy the week’s groceries or fill up with gas, even though I have paid my bills on time forever, I am immediately cutting my card into tiny pieces and canceling it.
The obviously correct mathematical choice for every other family paying off their cards every month is to do the same. Unless you just like throwing your money out the window.
I can take another 30 seconds to write a check for the groceries, and walk inside and hand the gas station cashier $20 cash. It’s easy. That’s what we all used to do before the banks forced us to start using Plastic of the Damned a few decades ago.
I sincerely hope Yingling and his association members enjoy paring their credit card portfolios down to only those people who really don’t have sufficient credit scores to justify owning one.
Maybe at that point a lightbulb will go off inside the head of some credit union CEO somewhere, and some American institution will decide to provide the basic services one used to find being performed in banks.