Not long ago, Paula was in the bank paying bills etc. and I, being the good husband I am, went along for moral support, which is actually code for my hoping for a free Starbucks once we were done! Anyway, whilst waiting in line for the teller to finish an endless chinwag with a random old dear, I became restless and began looking at the credit card brochure, you know, just to see what was out there. Actually, being a proud, card carrying “Aeroplan whore” I was really seeing if I could sleaze a few thousand extra miles by switching cards, which unfortunately, it turned out I couldn’t. Regardless, the shiny colors in the brochure were enough to keep my attention, so I kept on reading.
When our turn came we approached the desk and sat down; and while Paula conducted her business, I continued reading the brochure when, all of a sudden, I read something in it that turned my curiosity to horror! It was so shocking it made me wonder who the bigger whore really was – me for trying to legitimately “scam” a few extra miles by switching credit cards, or the bank for using good old “smoke and mirror” techniques in an attempt to arm a vulnerable segment of the population with high-interest credit cards? Here’s what it said: In order to be eligible for the entry-level card, an applicant requires a $15,000 total household income… $15 K TOTAL HOUSEHOLD INCOME? Are they nuts? It doesn’t take Einstein to see how this is already a recipe for financial disaster; however people like Einstein probably aren’t the target market they’re going after here. Let’s run the basic numbers and see just how crazy it would be for someone with an $15 K annual income to get their mitts on a credit card, even one with the minimum limit of $500.
• The minimum wage in B.C. is $10.25 per hour, so full time work at minimum wage would net approximately $20,500 (Gross Income) per year
• Based on the banks eligibility for acceptance, someone working for minimum wage only 28 hours a week would be greeted by this bank with open arms, who would say they’ve “earned the right” to have a credit card; at 19.99% interest rate of course! Come on down!
Now I get the fact that banks are publicly traded companies and they need to make money for their shareholders, to pay their staff, blah, blah, blah… like I said, I get it and nobody begrudges them for this. I also know it’s our responsibility to know what we get ourselves into, read contracts before we sign them, not to spend more than we earn, don’t buy what we can’t afford, etc. – I GET IT! But my problem is that while I know these things, people like like me (and probably you) aren’t the target audience; it’s some poor schmuck who probably doesn’t earn enough to feed properly feed himself (or his family) let alone pay his rent or insurance (s), etc. – you know, the same schmucks who, once bestowed with their new credit card suddenly believe they deserve a new flat screen or laptop or furniture whatever they feel they “need” in the moment – and since they “need” and “deserve” these things, they’re going to buy them right now with their new credit card! Sadly, at the time they don’t realize just how great a cost this instant gratification usually comes at… And just like that, the cycle of perpetual, unforgiving debt begins, and these folks soon add two new words to their vocabulary: “Minimum Payment”.
As I read this I couldn’t help feel that this whole “$15 K household income” minimum felt like an trap set to trick lower income folks (who often aren’t financially savvy) into believing they can buy and pay for certain things when the truth is that they usually can’t – as we saw, the numbers simply don’t add up. and in my disbelief I blurted out loud “Someone who only makes $15,000 per year should never have a credit card!” – And what happened next, almost left me speechless… almost.
The teller stopped what she was doing, glared directly at me with eyes bulging, (emitting a sting that rivaled my grade 3 teacher, Ms. McKinnon, that time I poured juice down my pants – don’t ask) and shot back in an authoritative tone “I STRONGLY disagree with that statement!”, then dropped her head and went back to the task at hand. Shocked at what I’d just heard, I calmly asked her to explain her position, adding that with a crushing debt epidemic in Canada, giving credit cards to low income earners would be adding to the problem, not helping solve it; and this tactic seemed to be a cleverly disguised invitation to keep this cycle of poverty alive and well.
She realigned her glare, and then with absolute precision, recited a carefully prepared retort to my question – a question I realized she’d been trained to respond to. She suggested that people don’t get in trouble by having credit cards, but rather by not understanding how to manage those credit cards; and that issuing low income earners a credit card is the first step that helps them learn fiscal responsibility; a first step it seems, that the bank is very happy to help them with. “Really?” I wondered out loud, adding in “Does the bank drive them to Wal-Mart as well?” I honestly couldn’t believe this banal explanation for why the banks sucker low income folks into getting credit cards, but clearly she did; or maybe she just said she did because her employers told her to. Either way, she wasn’t giving up her position.
Using the same numbers as above, I said there is no way most people with such a low income could avoid entering a cycle of debt should they have a credit card, since they were literally guaranteed to fall behind and wind up stuck in the never-ending cycle of making minimum payments, so really, how is this helping them out? Still glaring, the Teller wasn’t pleased one bit with my interpretation of what the bank referred to as “helping people learn fiscal responsibility”, but I could tell that she’d run out of prepared speeches. Noting this, I realized that maybe – just maybe – this might not be the way she feels, but when working for the bank might have to do some things that she doesn’t necessarily agree with; things like finding suckers to apply for credit cards they aren’t able to afford.
Don’t Shoot The Messenger
I realized that by doing this, tellers are in fact, just doing the job they’re told to do, because, like the rest of us, they too need a job to go to each morning; especially if they don’t want to join the ranks of the minimum wage folks clamoring for new credit cards! The last thing I wanted to do was make this a personal statement by challenging this person directly, because let’s face it, she isn’t the one who benefits every time the bank suckers another poor sap in with the “We’re here to help YOU learn to manage your finances” line; part of me still felt the need to clarify my position, but in the nicest way possible, and to end this exchange without being rude or impolite.
“Okay” I said, “I’m pretty sure that the 95% of the people who make $15,000 (gross) per year who have racked up their credit cards might not agree it’s the best form of fiscal education…” Her eyes began to widen again, and she began to open her mouth; “BUT,” I continued, “At the end of the day, the bank is a publicly traded company, and needs to make a profit, pay the employees, etc. so in the end, it’s all really about ways to do that, right?” I think this point of view caught her off guard a bit, and she responded with a curt “That’s right!” With Paula having finished up her business we both said “Thanks!” and got “Have a nice day!” in return from the teller, who I’m sure was happy to see us (me) leave. We walked out of the branch and into the sunny Saturday afternoon, making a beeline to Starbucks where I was looking forward to my “free” coffee.
I learned a lesson that day; it was something I always knew, but I actually learned it that day. Banks tend to prey on the poor of our society, and tricking people making $15,00 per year (Approx. $1,250 per month after taxes) into believing that they have an excess of disposable income is a perfect example of this. I believe if banks were truly interested in teaching folks fiscal responsibility, they’d focus on minimum monthly savings targets, not minimum monthly payments on a credit card with 19.99% interest; but then there wouldn’t be a life long cycle of minimum payments in that now, would there? But rather than being up front and honest about what this will mean to the cardholder (“Hey you! Take this credit card and sign up for a life of debt and misery for you, but profit for us!”) they trick people into believing that they too, deserve the same life as those seen in the slick posters and glossy brochures the banks use. As Macklemore says, it’s called “Getting tricked by business” and in the end, whenever we deal with credit of any kind, it’s always “Buyer Beware”.
I’ll sum it up like this: Anyone who chronically pays less than the full balance each month must understand that this is a habit that keeps them fiscally stuck FOREVER; and that trying to learn fiscal responsibility from those who profit from your debt is just plain crazy – it’s like colluding with an enemy, then being surprised when they stick a knife in your back. If you want financial advice, seek out information from those with your best interests in mind, rather than those with their stockholders best interests in mind. Read Financial blogs, books, listen to podcasts, something, anything – just as long as it’s its not sponsored by a lending institution! And with that, I’ll end my rant except to say that when we went into Starbucks, my wife made me pay for our coffees; something about being punishment for my “bad behavior in the bank”… WTF? I guess that’s what I get for trying to be a voice for the little guys… dammit!
Looking back now, what advice would you give your younger self about managing credit card debt? What was the “best ever” financial advice you ever got? Please let us know in the comments!