Credit Card Conundrum

Among my families decisions to green up our lives and become more self sufficient we started making other changes, an ethical stand if you will. In another post I wrote a bit about making the ethical decision to support local business as much as possible and stop supporting the mega corps. In one sense we had already started to take a stand on the mega corps over a year ago. We made the decision to close all of our credit accounts as soon as we could, and that’s what we have been doing ever since. This week I close out, interestingly enough, our Wal-Mart card which will leave us with only one credit account and that one will be closed soon too.

Last night we watched the documentary “Maxed Out.” This one is about the credit crisis taking place in the United States, not that this is a new thing mind you, we have been lead down this road by the financial industry for quite some time. My best guess is that the credit industry turned to the dark-side some time in the early 1980s. A time when excessive spending was some how going to make things better for all of us. Unfortunately for us the opportunistic financial industry swooped in like a hawk on a field mouse sunning itself on a lazy summer day, scooping us up with talons of mock generosity making credit cards available to people who in previous decades would have been laughed at just for applying. With the encouragement of the financial industry, spending beyond our means has become an American pastime.

Jump forward two decades. The mock generosity of the past has now turned into the predatory lending practices of the 21st century. “Maxed Out” takes a good look at the credit card industry and the financial industry as a whole. In my case it has been fairly easy to say “piss off” to a majority of the financial industry, unfortunately it is virtually impossible to get away entirely, the banks have seen to that. Just try and cash a check without paying an unreasonable fee, especially if you don’t have a bank account. Most likely you would have to turn to one of those check cashing places, but look out, most of the check cashing businesses are owned by big banks, even the ones that look like local mom-and-pops stores. Don’t be fooled by that hometown storefront, there is a good chance it’s owned by Wells Fargo, the largest player in the check cashing industry, coincidently the fourth largest bank in the U.S., oh and they are in the money order business too.

For many Americans, getting free from debt is one of our biggest goals, but getting there can be a really tough task. Most of us under 50 folks were not raised thinking about money the way our previous generation was. A penny saved is a penny earned, and other phrases may have been heard around the house, but they didn’t affect us the the same as they affected our grandparents. To the generation that was there in the 1930s, it was an important part of life. And here we are, learning those lessons all over again.

For me, getting rid of credit cards and “financial products” is a matter of self sufficiency and keeping my money tied to the local economy. If I don’t have the money for something, I save for it, or make due without it. Keep in mind that the financial industry is selling you services, just like any other mega corp sells you a product. When you use there services, they take money from you, and move it some where else, far away from your community.

One of the reasons we get into debt is trying to make things “better” for our kids. The best investment we can make for our children’s future is not passing along our debt. Something they really could use is a solid understanding about how the money we spend is circulated through the economy. In short, when be buy from the mega corps, and borrow (using credit) to make those purchases, out of every dollar we spend locally, around 5% stays in the local communities economy, if we are lucky. When we spend at locally owned businesses, with money we have, in our pocket, we can keep 80% or better in our own community, and ultimately pay around the same or even less by not including fees and interest.

Basic economics says that a consumer economy will inevitably fail. For the U.S. as a whole we can see it in our trade deficit and the inexplicably high national debt, for individuals it’s there in our mounting credit deficit, our credit cards, charge cards, car loans, and mortgages. There are a bunch of economists that believe our current recession is the continuation of what is already a second depression. A depression that will have to run it’s course deeper down the economic well before anything will truly stabilize it.

As a problem solver, my experience tells me, that when a problem is complex the best solution is to reduce everything down to the minimum necessities. When things are stable at that basic level then, and only then, a slow and steady growth can occur; in this case, for me and my family at least, it means going back to subsistence, back to a simpler, less complex lifestyle, well within our means. Decision making is a lot easier when you know exactly how much you have to spend, now shifting or wiggling or anticipating options, its ether yes we can or no we can’t. Not always fun, but liberating in many ways.

So where does all of this lead us? For me and mine it is comes down to; keep money as local as possible, while it is yours and when you spend it, don’t use credit, and as always support locally produced goods, services, and merchants. It is the American Middle Class that will save our economy, not the government or big business.