LBCC: Life Before Credit Cards

TGIF, Casual Friday, let me digress it’s Friday, I guess that dates me from another era. This is true. I walked the face of the earth before credit cards.

A few days back, I received a request to write a few words about credit cards. The most intelligent thing I can do in this case is to refer anyone and everyone to cardratings.com. I took a look at this web site and from what I could tell, it seems to be very comprehensive. I really think it has a world of information for the credit card user.

Last month Ben Bernanke appeared before Congress and answered questions about a whole range of topics. I remember him commenting that subprime mortgages were a good thing if done correctly. The key words were done correctly. Almost all financial products if done correctly or used correctly are a good thing. The problem is, some people abuse these products, and the abuse can come from both sides. I am not going to go into the questionable business practices of credit card issuers or the fine print on their credit card applications/contracts. I know Congress is aware of these shameful practices and they have it in their power to put a halt to it.

Credit cards are a tremendous convenience. In 1978, we took our children to Chicago to see the King Tut exhibit at the Fields Museum. We did not use credit cards back then. We either wrote a check or paid with cash. I remember the hassle I had when we were checking into the Holiday Inn City Center that day. The first thing the lady asked for was a credit card. In those days the closest thing I had to a credit card was a charge card for Shillito’s, now Macy's, in downtown Cincinnati. Luckily, with a little fast talking and flashing my driver’s license around I was able to convince the check-in lady that I was a solid citizen and I would pay the bill with traveler’s checks when we checked out. That’s right, I did not own a credit card in 1978 and I worked at one of the larger banks in downtown Cincinnati as a Bond Investment Officer.

Now I am going to get up on my little soap box, yes, it’s a P&G soap box of course, and say a few things about using a credit card. Don’t use a credit card for everyday living expenses unless you pay off the balance every month. Using credit takes discipline or lots of money, and if you don’t have either, stay away from credit cards for the most part. Using a credit card for what I would call a necessary improvement or repair, like a set of new tires, new work clothes, etc. things that will permit you to get a job or continue to hold a job and work, I think are proper uses of credit. You say I’m conservative. I like to think that I am fiscally conservative, but a liberal at heart.

The best thing to do is pay off the balance of your credit card every month. If you own a house and have equity in it, get a home equity line of credit. A Home Equity Line is handy to have should you suddenly need to replace a furnace or other major repairs. The interest rate may likely be lower than credit card interest rates and the interest is tax deductible. The important thing now with the economy turning south is to take stock of what you need to survive and what you don’t. If you are driving a car, your gas expense has double in the last two years. Unless your income has gone up in the last two years, your disposable income is down as a result of the increases in the gas price.

Tomorrow is Saturday and Saturdays are a good day for art. Stay tuned.