Credit Cards: The Perfect Pyramid Scheme and Legal
So, are you using a credit-card to fund your home
business opportunity or entrepreneurial venture? I am and millions of
other serious-minded entrepreneurs; likewise, use this lifeline of credit to fulfill
the dream of financial independence. Unfortunately,
credit-cards are like marriage, both are institutions endorsed by government
because once you sign the contract getting out will cost you more than what you
invested in the first place. Think about
when you said, “I, do” then, you have agreed to sharing your debt and/or wealth
with another individual and the cost of dissolving the partnership will often involve
50% forfeiture of current and future assets (bye-bye 401K). Now, credit-cards and their interests rates
on average are 20% of your existing balance (make sure your debt is low). Seems that borrowing the capital to fund the
enterprise is more expensive than the actual operational costs but, that’s the
economic reality.
Funny, how the concept of Free Market Economics
in the bedroom and kitchen can frequently resemble a criminal enterprise
involving extortion and being made an offer you cannot refuse if, you value
your health, wealth and personal freedom.
Hey, credit is part of all westernized economies, while fewer and fewer
people make purchases using raw fiat currency.
In fact, you get scrutinized when you insist on paying cash and have no
history of credit which puts you on the radar of Homeland Security or some
other intelligence agency. It’s no
accident that credit-cards, bank debit cards or plastic are the standard method
of payment, because paying cash or by cheque forces us to live within our
means. Businesses cannot profit by
people who are disciplined shoppers; hence, no financial education in our
schools because they want the kids to be as reckless as their parents who are
currently in debt from spending (yes, this includes me). Credit-cards are the middle-class version of
welfare and like the poor, both credit-card companies and government cannot
afford to allow their respective audiences to be educated consumers that use
their product in a responsible manner that results in short-term use.
I am addressing this issue because a mentor of mine Jeffrey
Combs of Goldenmastermind.com once said; “credit card companies are
brilliant because they get people to pay interest on money that doesn’t
exist”. In essence, people are paying
legal tender to access a line of credit that they don’t see, can’t smell nor
touch. Additionally, countless new
transaction fees are implemented by credit-card companies and approved by government
finance committee members because, “you NEVER bite the hand that gives you a bribe,
I mean a financial contribution, I mean political donation and then, after your
political career seek employment from the same industry you were regulating as government official because their salary
is higher and you as former regulator know how to circumvent that laws that are
designed to protect the consumer”.
Now, the concept is brilliant from a
business/entrepreneurial perspective because when a product/service is
intangible; yet, millions of people want it then, a collective sense of trust
in the product has been established (at least in the past, but may be not
today). Well, credit-cards are no longer
perceived as a positive but, more of a necessary evil; yeah, like marriage. Oh yes, if, you tie the NOOSE, her debt will
become yours so be careful. Oh yes,
learn about the danger of “compound”
interest with credit cards because it exposes the true quasi-criminality of credit.
Now, if the credit card companies were prohibited by law
from charging ridiculous interest rates to the loans of their millions of
customers then, the national problem of credit-card debt would be significantly
reduced. Unfortunately, government and
business have a relationship where “business lobbyist write legislation that is
supposed to regulate the conduct of the same industry they represent”, yes a
clear conflict of interest …forgive the pun but, business is business. Now, in 2008, the US Mortgage and Financial
Industries prompted by previous federal administration to extended home
loans (line of credit) to people, who didn’t meet the financial litmus test and
in reality couldn’t afford the monthly payments resulting in most
defaulting.
Hence, this Pyramid Scheme collapsed because no
revenue was coming in and no interest could be charged so as to generate profit
for the companies. Basically, the gamble
that people with marginal credit histories could pay their monthly bills plus
interest proved to be wrong. In
retrospect the idea was poorly conceived but, when you make deals with
politicians for special business privileges who are also, fighting for
re-relation then, you sometimes are forced to offer loans to people who are on
default. Additionally, taxpayers always
end up paying through a government bailout (you know, too big to fail) or
increased fees passed on to them. It’s
safe to say much of Corporate America functions like a pyramid scheme with
respect to unethical business practices and government regulations that in
truth, fail to correct conduct the average individual would suffer criminal
and/or civil sanctions but, “you get as much justice as you can afford”. Needless to say, financial criminality remains
more of a regulatory issue than criminal.
“The Credit Card Accountability Responsibility and
Disclosure Act of 2009 or Credit CARD Act of 2009 was signed by President
Barack
Obama on May 22, 2009”. “It is comprehensive credit card reform legislation
that aims "...to establish fair and transparent practices relating to the
extension of credit under an open end consumer credit plan, and for other
purposes."[1]
One of the critical reforms (lol) absent from The Credit
Cardholders' Bill of Right was any provision for price controls. So, the most important feature of credit card
reform is absent and consumers continue to complain and pay exorbitant fees
they were complaining about in the first place.
We shouldn’t be surprised because a common practice for committee
members who regulate industries involves them seeking employment at the same
companies they once regulated after their political term expires. Again, conflict of interests is like a bloody
virus that gets worse.
Long-term consumer activist Ralph Nader has spoken, lectured
and testified countless times about the unholy and corrupt relationship between
credit card companies and government at the annual meeting at Center for the
Study of Consumer Financial Services (CSCFS).
Mr. Nader spoke about his experience not having any credit-cards and provided
the following 10 reasons why he refuses to allow corporation to stop him from
using legal tender:
·
Plastic lays the groundwork for massive,
daily invasions of privacy
·
Once you enter the credit economy you fall under
the controls of arbitrary credit rating and credit scoring merchants
·
The credit card economy, with its
anti-competitive no-surcharge rules, etc. is inflationary and affects
negatively consumer purchasing power as well as lower savings rates
·
Credit cards encourage impulse buying
·
Credit card terms…You sign on the dotted line,
shut up and shop
·
Using cash/check encourages consumers to live within
their means and not get caught in an ever deeper cycle of debt
·
Paying by cash/check avoids the gouging of fees,
penalties, termination charges, and of course, sky-high interest rates for
consumers
·
Paying by cash/check….it prevents the addition
of any fraudulent charges to the bill.
·
Paying by cash/check avoids having to give away
your personal property to the likes of internet companies
·
Credit card issuers often approve consumers for
credit cards with maximum spending limits that are too high considering their
salary or lack thereof
It
would appear that Ralph Nader recognized long ago the culture of failure and
economic control credit-card companies attempted and successfully continue to
impose on the mases through daily financial commerce via plastic.
Unfortunately, the situation continues to get worse not only with crerdit-cards
but, with proposed laws like “Trade Secrets Protection Directive”,
that serves to increase the secrecy of corporate criminality.
Vaurn
James
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