Credit Card Potential Becomes Liability for Banks

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Ohg Rea Tone is all or nothing. He is educated and opinionated, more clever than smart, sarcastic and forthright. He writes intuitively - often disregarding rules of composition. Comment on his posts - he will likely respond with characteristic humor or genuine empathy. He is the real-deal.

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Credit Card Potential Becomes Liability for Banks

Credit Cards – a nasty phrase of doom or the potential for happiness?  That depends on whether you are a bank or a consumer.  And it also depends on the economic climate.  I have held about fifteen credits cards at any one time for many years.  I don’t carry any balances – I don’t owe money on any credit card.  My credit score hovers around 758 – and they tell me that is a good score.  What do I care – I am not borrowing any money anyway?  So am I an asset or a liability to the banks?

There was never a plan by me to have a bunch of credit cards.  I pick them up along the road of being a consumer.  I went to Sears to buy an $800 tool box.  The clerk asked if I had a Sears Credit Card.  Nope.  Well, he said, if I apply for a card and put the cost of the goods on the card, I get a 15% discount.  We are talking about $120 saved immediately by me – the consumer.  So I apply, take the discount, get a statement, and pay off the balance.  The new card is placed in my desk drawer, never to see daylight again.

I occasionally buy books from Amazon.com.  The last time I purchased about $50.00 in books and the shipping charge was something like $7.00.  The offered free shipping and a 15% discount on the purchase price if i applied for an Amazon.com Visa card.  That was a savings of $11.50.  Again, I applied, took the discount, got a statement, paid off the balance, and put the card in the drawer.  That Amazon card had a $3,000 credit limit.  The Sears card had a $2,000 credit limit.  Some of my cards have a $20,000 limit.  I have a bunch of cards – and a bunch is half of a gob.  My potential in credit card loans was around $100,000.

I have done deals like a large capital purchase of a new car with a credit card, then immediately transferred the balance to another card that offered 0% interest on transferred balances.  No need for a new car loan – or a used car loan.  That was back in the day when I did not have enough personal assets to pay cash.  But that was yesterday – before the banking collapse of 2008.

In the past I was an asset to the banks.  They could advertise they had 10,000,000 card holders – so businesses should accept their card to attract consumers.  Today, the banks are short on cash.  People are losing their jobs and using their credit cards to sustain them while they look for work.  My $100,000 potential became a huge liability to the banks – what if I exercised my contractual right to borrow that money?  What if everyone who had credit potential exercised their rights?  Whoooeeee – the banks would be in deep Doo Doo.  They would have to come up with the cash for all of those retailers.

The solution for the credit card banks was to reduce their potential obligations.  In the past three months six credit card companies have dropped my account.  I receive a very polite letter explaining that “because of inactivity for two or more years” we assume you no longer need our services.  There is no encouragement to keep the card – noting like, “Hey customer, use the card in the next thirty days or risk losing our wonderful relationship.”  I was deeply hurt by the cold hearted rejection – after all, that relationship was burried deep in my desk drawer.

American Express continues to solicit my business every month.  Perhaps they are not paying attention to the economic downturn, or perhaps they have been propped up by the economic stimulus package sponsored by the local United States Government.

So it is pretty clear, and should have been obvious to everyone right along, that the banks who have courted our friendship over the past decades are not very dependable.  I reviewed my credit card contracts and they do not proclaim, “…for better or for worse, till death do us part.”  I should have read the fine print.

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