Credit Cards - Friends or Enemies
Controlling Your Financial Well-Being
Did you know that credit cards did not exist prior to the 1950s? Before that, people paid cash for things, and sometimes business people used checks. Any earlier than that, the thought of handing over a piece of plastic and get goods or services in return was not even conceivable.
The very earliest cards were termed “travel and entertainment” cards. You didn’t expect to use them for anything other than getting plane tickets and meals at high-end restaurants. You also paid the whole balance each month – no revolving balances allowed.
In 1970, only 15% of Americans had a credit card. Back then only millionaires (are close to it) could get an American Express Gold Card. Not much later, financial institutions figured out that lending money at 18-32% could be lucrative. Even without collateral and offering accounts to anyone that could sign his or her name, the companies made money despite the losses from bad accounts.
We have to consider that the banks get money to lend from the federal funds rate – these days it comes them nearly nothing – and therefore really are earning 18-32% off their money. If one tenth of their accounts go bad, they are still making a lot of money off these cards.
Sixty years later, credit cards have become a way of life in America.
As banks made huge profits, a perception grew among the public that debt was a way of life. Now debt is the most aggressively marketed product in the history of the world. Now people see it as normal, and so they continue to take on more debt. Children grow up in households where everyday items are purchased with a card, from family visits to McDonalds to a day at a theme park – this is what they see as the way things are.
People entering their prime earning years have a perception that something that didn’t even exist when their parents were born is “a way of life” and “normal.” In fact, the possession and use of these plastic cards is seen as part of the process of becoming successful.
Are You Normal?
For reasons that a good psychologist could explain, people feel a need to be normal. They want to do normal things and that means they will get normal results.
Here is one view of what is normal: normal – business as usual – is that 70% of Americans live a paycheck or two away from financial disaster. In fact, it has become normal that foreclosures have reached an all time high every year for the past decade. It has become normal to have a million and a half bankruptcies in a single year in this country.
The most frequent cause of divorce is disputes over money. That is our social normal. People live with stress and distress because of debt. Lack of sufficient money becomes an obsession that makes people unproductive at work and harder to get along with at home. We can certainly declare that unemployment and divorce do not help anybody’s financial standing.
If you were content with normal you would not have enrolled in this course. You would not have made the investment and taken the time if you only wanted to maintain normal. In human society, normal is mediocrity. It is the average condition. Normal would be a sense that your life doesn’t belong to you. As the old song laments: “Saint Peter don’t you call me, cause I can’t go; I owe my soul to the company store.”
If that is normal, we should be doing everything we can to stay away from that.
Better than Normal
The writer, Henry David Thoreau (1814-1865) wrote that “the mass of men lead lives of quiet desperation.” We could include women in that description, as well. If we want to find joy and fulfillment in our lives we cannot live like everybody else. We have to be non-normal (we would say abnormal, but psychologists already hijacked the term).
What do the non-normal do? They create emergency funds of three to six months of expenses so that if something bad happens, it doesn’t ruin their lives. They invest in a college fund for their kids, they build a retirement fund, they even pay the mortgage on their home down to zero. It is widely agreed that these are good things to do. How many people actually do them?
Successful people are ordinary people who do extraordinary things.
The Next Step
You are involved in a course of study that will teach you how to become non-normal, which is what you must do to really achieve financial independence and get what you really want from life.
Of course, learning the theory is not enough: you have to put the principles into practice.
How difficult would it be to cut up your credit cards right now? With a good pair of scissors you don’t need unusual physical strength. Maybe you will feel a little withdrawal. If so, read your personal vision statement, close eyes and visualize yourself not only debt free but living in financial independence. You will never get there until you stop being normal with money matters.
Do you remember what we describe as insanity? That would be when you keep doing the same thing over and over while expecting different results. The law of cause and effect runs the operation of the universe, and will not allow the different results. It would be difficult to really enjoy your life if you were insane, but it would be insanity to believe that credit cards are a way of life that leads to long-term joy and fulfillment.
If bucking the trends and marching to your own drummer and conducting your life non-normally seems weird, so be it. A thousand years ago, the word weird meant “fate” (i.e., the weird sisters of Shakespear’s MacBeth). A little weirdness and non-normalcy allows you to create your own fate.
As a final thought, who has more of your personal best interest at heart, you or a faceless credit card corporation? You protect your best interest when you take control of your own financial life.