The Borrowers
Swiping that plastic can be fantastic
Credit cards have gotten a bad rap, says commentator Meghan Daum, who thinks plastic can actually be pretty great, if needed.
Meghan Daum (meghandaum.com)
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Kai Ryssdal: Americans are getting an earlier start than ever racking up credit-card bills. A study today from the college financing company Sallie Mae shows last year's seniors graduated with average balances of more than $4,000 on their credit cards. Commentator Meghan Daum has some experience with that. She says there is lesson there, just not the one you might think.
MEGHAN DAUM: Debt, my father used to say, is the American way of life. He wasn't condoning this, merely pointing it out with the same austere detachment you heard in that famous line from "The Graduate" -- "one word: plastics." Still, I took my dad literally. By the time I was 25 I'd acquired no less than seven credit cards.
And, granted, in my 20s, I did have some credit-card balances that outlasted even my longest relationships.
But if you'll forgive my honesty, I'd like to offer up a defense of credit cards. Sure, they can ruin lives, but occasionally they can save them, too. Or at least help out. Don't try this at home, kids, but in my salad days I used credit cards not just for actual salad at the supermarket but for grad school tuition fees, doctor bills, tax payments, household utilities and -- keeping it classy -- cash advances for the rent.
OK, not great. But still, thanks to those cards I was able pay my professional dues in ways that would have been impossible otherwise. In other words, even though I did plenty of paid work, I could sometimes take on unpaid work that would lead to bigger things. It wasn't an ideal strategy, but in lieu of underwriting from my family or the NEA it was the only one I had.
Of course, credit was easier to come by in the 1990s. Good luck to the artist who tries to finance his book research or documentary film with a stack of Visa cards today. As President Obama said last week "excess is out of fashion." And though he was talking to bank executives, he might as well have been talking to all of us.
But what goes out of style eventually becomes trendy again. And despite the hard lessons we're now learning about the perils of credit, my guess is that when this crisis is over, be it in five years or around the time of the next ice age, we'll go back to our debting ways. Why? For one thing, we have short memories in this country. For another, we're tireless believers in the American way of life -- and the plastic that makes it possible.
Ryssdal: Meghan Daum writes a weekly column for the Los Angeles Times.
Comments
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From NC, 04/14/2009
Credit cards *used* to be good before people lost any sense of discipline and banks got addicted to the revenue flow and lowered standards for entry and increased limits foolishly.
Today, with a system that not only encourages you to assume debt (Rewards Systems), but penalizes you for not doing so (FICO), credit cards are a hazard best avoided. Add in the ludicrous interest rates, fees and draconian penalties and I can't see a valid reason for owning a credit card.
Let's be completely honest. We can blame banks, and realtors, and government all day long, but the truth is we got ourselves into the current mess by simply living well above our means and credit cards will driver in that behavior.
04/13/2009
Credit card debt, is not the American way. The American way was, save up. You knew a cost was coming, you scrimped on what you spent, and saved instead.
Using credit, the most expensive money ever known, became a modern idea--when interest was in single digits. It helped that there was modern way to make sure, your records were about you, and not someone with the same name. That modern tracing device was the Social Security number, which originally was advertised as it would never become a number like that tattooed on the wrists of Jewish labor camp detainees.
But, with a SS number, your income can always be found wherever you go. Its safer to loan, knowing your credit history belongs to you, and future income can always be found--and attached.
From Rathdrum, ID, 04/13/2009
In response to Megham Daum's comments about plastic... it may be the American way of life to use credit cards, but perhaps we need to learn to live within our means and not buy on credit things we could easily wait for, or don't need at all. We have become a culture of want, want, want, and we have so much. We need to perhaps enjoy what we do have, and learn to live with less?
From New Haven, CT, 04/13/2009
2009 April 13
What was missing from MEGHAN DAUM’s story on credit cards today is the fact that for nearly 40 years debt has been substituting for wages. What does this mean?
Since the 1970’s wages have stagnated, while productivity and profits have skyrocketed. In addition, the corporations exported production jobs and, increasingly, service jobs. The result has been that more and more people in the same family have to work more jobs and longer hours just to keep up. And the corporations and their owners accumulated more money than they knew what to do with.
People bought oversize homes; they borrowed on their homes. They put on their credit cards whatever they could, including medical and tuition bills. Relevant to Meghan’s case, in the 1930’s a student could earn enough during a summer break to pay for tuition at a public university for the next two semesters. That’s no longer possible. Now many students go deep into debt with the hope that their degree will turn up a well-paying job.
Seeing debt as the next goldmine, the rich decided to invest in loaning to the poor, who were to become the source of big profits through subprime mortgages. That strategy has catalyzed the mess we’re now in. But ending subprimes won’t fix the contradiction of substituting debt for wages. With principal and interest payments both due, workers are in truth paying the boss to work for him.
When will those commenting on the economy explain to us how endlessly increasing debt for the population as a whole can possibly sustain any economy?
From ME, 04/13/2009
THANKS A LOT MEGHAN!!!!!!! I have been lecturing my sixteen year old about the evils of Credit Cards. That you should have ONE so you can rent a car or a hotel room But NEVER NEVER actually use it. Set your credit limit to $1000 and no more. Then YOU come along and encourage bad behavior. Meghan maybe you had a family that could bail you out if you got in trouble but that is not everyone's situation. Keep your patrician ideas and ideals to yourself. Credit Cards are a bad deal for 90% of the people who get suckered into them.
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