1017 Credit's Dirty Little Secret

That's what Jim Aviles of San Francisco called it in a letter to the Wall Street Journal today. His point was that merchants pass along to customers the higher fees banks are charging merchants for each credit transaction. Well, yes of course, no one gives away a product, so marketing and selling expenses are part of what you pay for. That's also my objection to loyalty cards and rebate gaming--those of us who don't or won't play, are the ones paying for those of you who do.

But the poor disproportionately pay by cash or check Aviles says (actually a lot of us who don't want to be trapped in credit card debt are careful about their use). People who are poor credit risks or who have filed for bankruptcy are probably included in that. So the poor are footing the bill for credit card users because we all pay the same price. No more cash discount.

"Here's the dirty secret of the card issuing industry," Aviles writes. "Because card regulations demand that cardholders pay no more for goods and services than cash and check customers, the working poor are subsidizing the vacation points earned by American's top income classes."

I just received one of those "rewards" credit cards in the mail. I am pre-approved and get a "companion" mini card. Isn't that just so cute! Just like the grocery and drug store loyalty card--I can attach it to my key chain. Now, my rewards have to be spent at a particular auto dealership, one point for every dollar I spend on other purchases, plus (I'm breathless) 2,500 bonus points after I make my first purchase, which would be (whoopee) $25 off my next new car or service.

The small print on the back says "Pursuant to requrements of law, including the USA PATRIOT ACT, Bank of America is obtaining information and will take necessary actions to verify your identity." I wonder if other librarians know about this? They are the stronghold protecting us from the PA (although not from terrorists).

If I charge my next car (usually you pay less for a car if you pay outright and don't finance), I'll get 5 points for every dollar I charge (subject to additional terms and conditions not stated here in the small print). I assume this "deal" for points would keep me from shopping for the best car loan because I'd have a $20,000 credit line.

The next line says they have already obtained information in my credit report in order for me to receive this offer to see if I was "creditworthy." But they still want my Social Security number and my mother's maiden name (don't banks ask for that too?)

The next noise you'll hear is my scissors cutting up this credit card, even though I'm subsidizing your next purchase by paying cash.