A Rant about Credit

Death on the Installment Plan -- novel by Louis Ferdinand Celine

The United States can be an amazing place. For a country that's so materialistic, the basis of our economy is something completely intangible: credit.

Credit is a measure of someone's belief that you will pay your debts. If you have a good history of paying your debts, people will extend to you ever greater amounts of credit. Your credit is measured as the amount of money you are allowed to borrow at one time.

I find this amazing. The more you borrow money, the more you are allowed to borrow. If you always pay cash for goods and services, you will never establish credit. Yet isn't someone who always pays cash actually a better financial manager?

I don't own a credit card. This has not generally been a problem, except for a few isolated instances (renting a car in particular). I don't believe in the credit system. It lets people pay for the privilege of getting themselves into debt. The penalty rates are usurious, but that's a tangential objection. Credit companies offer people the promise of so much now, and people seem to forget the later - until they're stuck with the bill.

So it takes me a little longer to get some things done.

Now that I have a job where I might need to travel, and don't have a card, a lot of people are telling me to get one. "How?" I've asked. First I have to get a "starter card" (say, Sears), then buy a few things and pay them off promptly, then I can get one of the big cards (Discover, VISA, American Express). Huh? I have to buy things I don't want or need to prove to a credit company that I'm a good financial planner? Did I miss something?

The situation in Oregon is even more interesting. When I got out here, I discovered that stores will generally not accept checks without a "check guarantee card". This is a card which provides around $100 liability in case a check bounces. And to get a check guarantee card, they check - yes, you guessed it - your credit history! It's either that or else you have to wait a few months to prove that your account maintains a good balance.

Earlier this year I almost bought some furniture to store some clothes. It was nice, but more than $100. The store wouldn't accept a check without a card. I made sure that they knew exactly why they had lost a sale. (What's amusing is that I could have written a bad check with the card, and anything over $100 would not be automatically covered by my bank anyway!)

The credit model is like Calvin's (of Calvin and Hobbes) question "How do they know this bridge can only handle 2 tons?". His father's answer is, of course, that the builders drive heavier and heavier trucks over it until it collapses, rebuild it, and post the weight of the last truck to cross the bridge safely. The same is true of credit; a person with good credit accumulates more until eventually he or she collapses under its weight. Is it any wonder there are so many people in debt to credit companies?

Let's face it, the whole situation's a sick joke. To prove you're a good credit risk, you have to go into debt. If you just want to establish a good credit history, you must buy things.

No more for me thanks, I've had enough.

Last updated 10 February 2001
All contents ©1996-2002 Mark L. Irons

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