When it comes to consumer credit, I’m not unique among Americans. I see, I want, I buy, I pay interest.
I understand that credit is expensive, that saving is good and borrowing can get you into trouble. That’s why credit cards are reserved for those impulse purchases that you can’t pay for NOW, but just need to stretch those dollars until the end of your billing cycle.
Along comes the end of the billing cycle, and whaddaya know? There’s rent, there’s that wireless bill or car payment (By the way, car notes simply aren’t considered actual debt where I live). And maybe there’s that other credit card; you know _ the one with the low, low interest rate that you moved your outstanding balance to? Maybe that’s due at the same time as well.
For Father’s Day, I asked for a $100 10-sheet shredder, so I wouldn’t have to open all those credit card offers that would otherwise jam my cheapo 3-sheet model. No matter how sneaky they are about marking their envelopes, I can tell they’re card offers because I can see the image of a big zero and a percentage sign through the envelope or I notice that the return address is in Delaware, where I’m told the tax laws favor this, um, commerce.
I’ll let the press release speak for itself:
BART is now thanking its riders by offering reward points – points that customers can redeem at no additional cost for BART tickets or even cash.
“This is just another way for BART to say thank you to our loyal riders,” BART Board President Lynette Sweet said. “Our customers are extremely important to us, and the more we can do to show them our appreciation, the better.”
Not all BART directors saw it that way, however.
“It’s not my favorite thing BART’s doing,” said Tom Radulovich, who represents a San Francisco district. “In a country struggling with consumer debt, is that something BART ought to be doing, providing credit cards?”
The cards are part of a larger program of using private partners to provide services for BART riders, like TV screens on BART cars with news, info and ads and a wi-fi setup that, like these other initiatives, cost BART nothing except use of its good name to get people to buy stuff.
BART spokesman Linton Johnson defended the program, calling it “an opportunity for some folks to save a whole lot of money. If you use it correctly, you get a week free of BART each month.”
Let’s examine that deal: According to the press release, one needs to buy $100 worth of BART fares, which is seems give you the most points for the dollar, and then $2,000 in other merchandise every month to get 2,500 points and earn your $25 free BART ticket.
Read the fine print and you’ll find interest rates that range from 7 percent to 15 percent above the prime rate (to say nothing about default rates) and balance transfer transaction fees of “3 percent of the amount of each transaction, but not less than $5 nor more than $99.”
To point up what might be the pitfalls in this arrangement for someone such as yours truly, I thought it would be good to talk to a credit counselor.
Shirley Dean, education director of the nonprofit Consumer Credit Counseling Services, prefaced her remarks by saying, “I would never say credit is bad.”
On the other hand, she pays a premium annual fee on an American Express card, so she’s forced to pay the thing off each month.
“Credit is a convenience, but any incentives like this can sometimes lull us into spending money that sometimes doesn’t fit into our budget,” she told me.
She should know. She was previously a vice president at Wells Fargo Bank, although not in the credit card department.
“I was surprisingly ignorant of the cost of consumer credit. I was one of those people who routinely paid the minimum,” discovering, the hard way, that “if I charged $1,000 on a credit card with a 19 percent percentage rate,” and pay only the minimum, “it’s probably going to take me more than seven years and cost me $2,000 to use that money.”
How does BART respond to such concerns?
“I think people have to be responsible for their finances,” Johnson told me. Credit, “like everything else, you want to use it in moderation.”
Call me biased, but I’m thinking running up $2,100 a month might be tipping the scales in that department.
“We just encourage people to use the BART Rewards card responsibly,” Johnson said. “If they can’t do that, they should get some help.”
He should know. He told me that he had been to credit counseling himself after accumulating $12,000-15,000 in debt in his early 20s.
“I’m proud of the fact that I was able to learn my lesson and now I’m a much better person because of it. I pay off my credit cards every month.”
Photo from www.uscourts.gov.