Pay, Watch Them Steam

Credit: The Banks And Credit Card Companies Just Hate It When You Pay Off Your Balance On Time, Depriving Them Of Lucrative Interest.

April 27, 1997|By Robert A. Erlandson

I'm a "deadbeat" - and proud of it. Credit card companies hate people like me. Ironically it isn't because I'm stiffing them on my bill, which is the normal definition of a deadbeat. No, it's only in the perverse credit-card world that someone who pays on time is a "deadbeat."

In credit-card philosophy greed is good - it leads to debt. Model customers run up bills and pay in installments, with the high interest that makes the business so lucrative.

Too many people have been gulled into believing that plastic somehow represents "free money." Buy now! Buy now! Gratify that impulse! Pay later!

Credit card companies love people like that, all the way to Bankruptcy Court - and sometimes beyond.

Sears Roebuck and Co. told a federal bankruptcy judge in Boston that it would stop hounding its card-holders to pay off their accounts even after the debts had been erased by bankruptcy. Court approval is required for such collections and Sears admitted it didn't tell the court what it was up to.

MBNA Corp., one of the country's largest credit-card companies, reported that its first-quarter earnings had risen 34.4 percent but that its delinquency rate had also risen over the same period last year.

Just think if we still had a Debtors' Prison.

But those pesky "deadbeats" are still out there, paying up on time, not paying any interest, not incurring extra debt.

One high-priced executive who couldn't figure out how to squeeze the "deadbeats" got the ax. Poor baby.

Time reported in October that the resignation of the president of AT&T's Universal Card subsidiary was spurred by the fact that about 60 percent of its 18.3 million accounts were held by people who pay in full each month.

Got to do something about them.

Gimmicks are always useful. Card issuers offer various rebates for those who use their plastic at designated outlets, discounts, even "extra credit" when the card limit is reached. But once again those "deadbeats" spoiled the fun; they accepted the rebates and still paid up promptly.

When the card issuers learned that the gimmicks were costing them money their idea of creative thinking kicked in. Drop the gimmicks? Heck no; impose a fee on the "deadbeats" for paying on time.

That bright idea, understandably, provoked howls of protest and is so obviously wrong that Rep. Joseph P. Kennedy II, a Massachusetts Democrat, is preparing legislation to bar such fees, the Boston Globe reported. The bill should be filed in the next few weeks.

Although Time reported that AT&T, having booted its president, was not planning to surcharge those who pay up, the company was looking for ways to induce card-holders to take on more debt.

More debt. When the country is already staggering under the weight of consumer debt.

Americans charged over $1 trillion on credit cards last year, according to a report released in February by the Washington-based consumer-advocacy group, the Consumer Federation of America.

Nearly one-third of the debt is being paid off in installments, said the study, which also estimated that Americans carry an average balance of $6,000.

The ever-rising tide of personal bankruptcies, many of them attributable to overwhelming credit-card debts incurred by people who had no idea what they were getting into, has been reported endlessly.

In the era before credit cards, most Americans considered it a virtue to buy only what they could afford and pay promptly, even if it meant saving up for a long time.

Easy credit - even to those who can't afford it - destroyed that concept, which is ridiculed now as a "middle-class" anachronism.

Credit has always existed, of course, but there were no credit card issuers to fill mail boxes with ever-more-persistent offers of low interest rates (at the outset) and low or no annual fees - urging people to spend, spend, spend.

Issuers emphasize convenience as a big attraction for their plastic and indeed, credit cards are convenient, particularly for people who just don't have the ready cash or do a lot of mail-order buying.

Card issuers want it both ways. They trumpet convenience but discourage those who use their cards only for convenience, those "deadbeats" who refuse to go into debt just to swell the profits of credit card companies.

Competition is ferocious among card-issuers for new accounts. Hardly a mail delivery passes without at least one "pre-approved" offer of a credit card, more and more of them in the name of a civic, fraternal, heritage or hobby organization which gets a percentage from the issuer.

Once there were plain old credit cards. But the more affluent wanted to show their clout so the Gold Card appeared with its larger credit line. But soon Gold became so commonplace that more distinction was demanded. That led to the Platinum Card with its many "privileges," that is now being pushed like mad.

What next, the Diamond Card? The Moon Rock Card? What degree of exclusivity will be enough?

But the funny part is that it really doesn't matter because every credit card has the same bottom line: The bill must be paid; sooner - if you're a "deadbeat" who hates to pay interest - or later, which makes the credit card company smile as your interest mounts up.

Why make them smile? Be a "deadbeat," if you can; pay your bill every month and smile yourself.

Robert A. Erlandson is a reporter in The Sun's Baltimore County Bureau.

Pub Date: 4/27/97

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