American citizens have many important rights but the “right” to buy things on credit and pay for them later is not one of them.
One of the criticisms of the “Credit Cardholders’ Bill of Rights” recently passed by the U.S. House is that it could restrict some people’s access to credit. Why is that is a bad thing? Some people obviously can’t handle credit.
The ability to access credit shouldn’t be a given. It should be a privilege based on a person’s record of being able to responsibly manage that credit. When credit cards first became popular, their use was largely a matter of convenience. It was easier to pay for some goods and services with credit cards than with a check or cash.
Credit cards were more readily accepted than checks and more convenient than cash. People didn’t have to carry as much cash, especially when they were traveling, and if they encountered an emergency situation, a credit card could come in handy. The idea, however, was to use the card for convenience and pay for your purchases at the end of the month. It was not to use credit to buy things you didn’t know when you would be able to pay for.
Clearly, there are many people today who would have been far better off if they’d never been given access to credit. Raised in a society focused on material consumption, it was too easy for people to charge purchases they couldn’t really afford to make, and companies that reaped huge interest payments on credit card balances did little to discourage the practice.
Michelle Singletary, who writes a finance column carried by the Journal-World, noted last week that the credit “Bill of Rights,” while well-intentioned, included many loopholes that would continue to allow people to get trapped in credit card debt. There has been plenty of talk about credit “transparency,” but Singletary had a better idea.
Her plan, which she called “point of sale transparency,” would require credit card holders preparing to make a purchase to read a statement spelling out how much they owed on their credit card and how long it would take them to pay it off if they made only the minimum payment. Such information might prompt at least a few people to rethink their purchase.
Credit card companies have made access to credit easy because they make money from those who are least responsible in using credit. That should change. Rather than a “right” extended to anyone, credit should be a “privilege” available to people who have a reasonable expectation of using it responsibly.