On Monday, you go to the store, and buy a bag of groceries. It costs $50. You get it home, and put some of it in your fridge, some in the cupboard, and some in your stomach. Yum, yum. A few days pass, and as usual, you eat your way through about half the food. On Thursday, the grocer calls you. He informs you that they have decided to change the price of your groceries – see, the price of pork belly futures has gone up, and he has decided to pass the expense off to you. The $50 bag is now going to cost you $200, so you owe the store an additional $150. You can’t believe it. You’re outraged – understandably so. You decide to put it all back in the bag and cart it back to the store. But then you remember, you can’t – you ate half of it. You’re going to have to keep it all, and pay dearly for the privilege.

Welcome to the world of consumer credit.

When you get a credit card, you are purchasing a product. That product is a loan. The terms of the loan are expressed in a contract between you and the bank. I just want to go on record to say, We are out of our minds if we think it’s fine to enter into a financial contract that says that the other party may unilaterally change the terms of the contract in their favor whenever the mood strikes them. And yet, Americans do exactly this thousands of times every day. We’re so used to it that it seems normal.

Sub-prime credit card programs are even worse than standard credit products. Massively powerful financial institutions, such as Cap One, Chase, and Citibank run these scams against the poorest people in our country, first dangling fantasies of dream fulfillment by way of life-enhancing blow-molded petrochemical products, and then grinding these people into the ground of financial ruin.

Here’s how it works. A typical bank credit card scam, run by Chase, Cap One, or other purportedly upstanding major financial institutions, offers people with credit problems a $3000 credit line and reasonable interest rate, such as 9%. But then, when the credit card arrives, it comes with a $250 limit, because, well, based on your income, that’s all you deserve. If this is your first trip into the world where Life Takes Visa, or Everywhere You Want to Be, or Insert Some Other Lame Aspirational Tagline du Jour Here, you may be shocked to discover that the brand-new card carries a starter balance of $198 in sign-up fees, leaving you with a remaining available credit line of just $52. To keep the credit line open, the bank will charge a monthly service fee of $6 to $10. Now, wait a couple months, use the card once for a $50 purchase, and you are over the limit, which triggers a $40-$50 penalty fee. Oops, now you can’t make the full payment, and this goes on for two months, so your interest rate goes up to 30%. It’s all downhill from there, straight to a $3000 debt for your all-American dream of a $50 toaster oven. Or a tank of gas.

When challenged, the banks say that these programs are priced and structured for the high risk market they serve. But if all these people can afford is a $30 per month payment, why are the banks issuing them cards in the first place?

Here are some other examples of Evil Empire credit card policies that should be illegal but aren’t (remember kiddies, credit cards were deregulated 30 years ago, since deregulation would increase competition and benefit consumers… um, yeah):

“Universal Default” – a late payment on a single card can result in high penalty rates in excess of 28% on every credit card you own.

“Two-Cycle Billing” – this is very complicated, but the result is that you will end up paying interest on balances you have already paid. Even worse than the grocery example above.

“Retroactive Price Hikes” – Almost all credit cards have this. You purchase a credit product at a specific rate, and then, later, without your approval, the terms of your agreement with the bank are changed by the bank, often for no apparent reason. To be clear, this can mean that you purchased the credit at a specific rate way back when, and are paying it off, and two years later the bank can change the terms of the deal. This is fucked up.

Most people are surprised by what the banks are getting away with, me included. Finally, I just got fed up with being treated like a bloodletting victim instead of a customer. Last year, when my credit card expired, I didn’t bother activating the new card. I don’t have any problems with my accounts, but I’ll be damned if I’ll let some bank yank me around on the end of a financial chain like that. If I can’t have control over the product I’m buying, I don’t want it.

Consumeraffairs.com

(painting by heike talbert)