Column: Using credit cards to find buying power, prestige and debt
Published 12:00 am Monday, October 14, 2002
&uot;Think what you do when you run in Debt; You give to another Power over your Liberty.&uot; &045; Benjamin Franklin, &uot;The Way to Wealth,&uot; July 7, 1757
When I got my first credit card, a Dayton’s store card at age 18, I was thrilled. It was just a plain white plastic card featuring the Dayton’s logo, but to me it was buying power. With a $1,000 credit limit, it enabled me to buy all kinds of clothing I could not otherwise afford on my supermarket employee salary.
In addition to their trendy-but-incredibly-overpriced clothing, Dayton’s also housed a Ticketmaster outlet. I was able to use my card to buy tickets to any concert I wanted to see. This was an especially big deal to me, since if my friends and I wanted to go to a concert, I could just charge the tickets and collect the cash from them.
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To make a long story short, I didn’t always &045; okay, I didn’t ever &045; save the money I had collected from my friends to pay my Dayton’s bill. I just assumed that since I had about a month to come up with the money, I’d be able to make it up when the bill arrived. Less than one year after I got the card, I learned what would happen if went over my credit limit and was late on a few payments. My credit card was canceled.
Fortunately, I have long since learned about financial responsibility. I no longer equate having multiple sources of available credit with being rich. Rather, I am appalled &045; and, I admit, somewhat amused &045; by the vast recruitment efforts of creditors today.
One thing that amuses me is creditors’ love of precious metals. At one time, it was considered an honor to &uot;enjoy the prestige and recognition that comes with a gold card,&uot; to paraphrase the exaggerated advertising I’ve read. A gold card meant you had proven your responsibility and were rewarded with a higher credit limit to encourage more spending. I suppose at one time, having a gold card was similar to being one of the star-bellied Sneetches in Dr. Seuss’ world.
Like the PT Cruiser in today’s world, though, gold credit cards flooded the market and ceased to be a status symbol. Now everybody could have a star on his or her belly. Nobody was impressed by gold anymore, so the card companies had to come up with something new. They wanted something even more rare and valuable. Enter the legendary platinum card. Prestige was back, this time with unprecedented spending power. However, platinum is no longer a hallmark of prestige. Titanium now holds that distinction &045; at least until the plutonium card is introduced.
Though some of their &uot;prestige&uot; gimmicks are hokey, targeting people with good credit is not a crime. Unfortunately, neither is deliberately targeting people with poor money management skills and even worse credit. Some credit card companies proudly advertise &uot;Bad Credit Okay&uot; in hopes of luring customers who will finance their salaries through high interest payments and late fees. This practice is about as ethical as building a liquor store next to a halfway house.
Almost as bad are secured credit cards, which require the cardholder to deposit money into a savings account at the issuer’s bank equal to the amount of credit they want. However, their card’s eligibility requirements ironically exclude the very people they intend to serve. People who can save enough money to justify opening an account they can’t touch without a penalty probably don’t have credit problems.
My prediction is that secured credit cards will soon disappear. Prepaid credit cards will eventually be available in stores. A nominal interest rate, based on the face value of the card, will be paid at the time of purchase. When finally used, the card number will simply be checked to determine available credit. A special four-digit prefix indicating that it is prepaid will eliminate the need for an imprinted cardholder name. These will be ideal for the person who only needs to make a one-time purchase, such as an Internet transaction or a hotel room reservation.
Granted, this type of credit card would do nothing to help its users establish credit &045; but nobody could ever be turned down, either.
Dustin Petersen is an Albert Lea resident. His column appears Mondays.