“Servitude” is one of our favorite words here at CYC. It’s just so versatile in the realm of personal finance. It describes the average employee’s relationship with her employer, the average debtor’s relationship with creditors, and the average human’s relationship with money.
Credit card debt is an inescapable condition of life for most people, as much a constant as snow in winter or the sun rising in the east. On the 1st of every month, you examine your brake fluid level, flip your mattress, and write another check to MasterCard to cover your minimum balance and maybe a little more.
Like illegitimacy, morbid obesity, and collecting welfare, the idea of credit card debt having shame attached to it sounds Paleolithic in 2011. Why shouldn’t it, when the issuers charge those confiscatory rates and expect us to pay them as some sort of punishment for spending our own money? It’s un-American, I tells ya.
You probably already have a card, if not several. That’s just what we do when we reach adulthood in this society. As far as rites of passage go, it’s less jarring than having to leave the village and come back with the head of grizzly. Or cotillions.
Maybe we can catch you early. Maybe you’re young enough not to have anything beyond a debit card, and want to build your credit history. Oh, who are we kidding? For every person who makes a sober effort to “build his credit history”, 50 others want a credit card solely so they can overextend themselves.
Some folks can neither handle nor detect sarcasm, so we’ll play the rest of the post straight. Which isn’t easy.
There are plenty of legitimate reasons to obtain a credit card. A credit card as a concept that is, rather than a particular card. And by “plenty” we mean 4:
- Building credit history (see above).
- Fronting money when you need to leave a deposit larger than either the value of what you’re taking possession of or what’s in the account tied to your debit card (e.g. renting a car)
- Consumer protection.
And one more, universality. You don’t want to run the risk of your card not being accepted, especially if you carry only one. American Express is recognized around the world, but as any American Express cardholder knows, even in the United States plenty of businesses won’t accept it. VISA and MasterCard are accepted almost everywhere, from Timbuktu to Timor. Discover claims that’s its honored in over 40 countries, but that’s news to people who live in 39 of them.
Any card will give you the first two.
As for consumer protection, you want your issuer to guarantee defective purchases up to the purchase price. If the card issuer is willing to underwrite what you buy, then the card issuer should be willing to bear the entire brunt should things go wrong.
I’ve had two instances when I relied on card issuers. In one, I visited South Africa and used the VISA debit card issued by my former bank. Some enterprising sales clerk now had my card number, a copy of my signature, and, presumably, the 3-digit Card Security Code.* Weeks later, after I’d returned home, she rang up a couple of purchases each around $50. I saw them on my next statement and brought them to my bank’s attention. They made me fill out a form and then refunded me the money within days.
American Express helped me out with a hotel that didn’t state a no-refunds policy, but charged me for a full stay even though I cancelled with plenty of days’ notice. The resolution took little more than a week, and I didn’t lose a penny.
Neither time was the issuer at fault. In the first example it’s pretty obvious who’s guilty, yet my bank reimbursed me under VISA’s auspices. They figured it was worth the $100 or so for them to keep me as a customer, even though it wasn’t. They’ll never make $100 off me.
In the second example, the card issuer was slightly at fault. Maybe. You can argue that the because the issuer gave its imprimatur to the hotel, vouching for it as the kind of honorable company that doesn’t assess arbitrary charges to customers who cancel, the issuer should be held somewhat responsible. I’m guessing the hotel (it’s a tiny place, 17 rooms) doesn’t pull that garbage any longer.
That leaves rewards. Which we’ll get to Friday, in Part II of this thrilling dilogy (bilogy?) on which card(s) to get. The definitive answers, coming up. Until then, pay cash.
*So does every other retail employee and waiter you’ve ever dealt with. But yeah, Grandma, typing in your credit card number on the internet is risky.