Starting this week, MainStreet will scour the world of personal finance for news items that confound us due to their blatant lack of common sense. If you’ve got any suggestions, by all means, drop us a line.
1.Oh No You Didn’t, MoneyWatch.com!
We’d just like to note we didn’t wake up today and decide that we were going to throw down with another personal finance site, but this morning we read something on CBS’s MoneyWatch.com (Stock Quote: VIA) that really grinds our gears.
Jill Schlesinger, a.k.a. “The Financial Decoder,” a.k.a. “The Face of MoneyWatch,” posted a little piece called “Credit Card Reform Stinks for Responsible Consumers (aka ‘Deadbeats’),” in which she argues that the new credit card legislation is probably going to be really bad for responsible borrowers who don’t carry a balance.
Here’s the logic: The credit card industry generates the majority of its revenue from people who carry a balance, and are charged late and over-limit fees. The proposed rules limit that income stream through consumer protection, and the industry will be forced to make up the shortfall somewhere else. In other words, the "deadbeats" (that’s what the card industry calls people who don’t carry a balance) will have to pay more.
Ms. Schlesinger suggests the credit card companies might do any of the following to generate revenue:
1. Start charging annual fees.
2. Stop offering rewards programs.
3. Start charging interest immediately after a purchase has been made.
First of all, as both MSNBC’s Bob Sullivan and the Consumerist point out, Ms. Schlesinger’s argument is essentially a regurgitation of the credit card industry’s talking points. Beyond that, if you spend a minute thinking about her suggestion, you’ll find it makes no sense. If the credit cards charge an annual fee, don’t offer rewards and start charging interest immediately, there’s no reason for deadbeats to use the card. They will use debit cards instead, or they’ll use charge cards like American Express (Stock Quote: AXP), which require full payment at the end of every month and already require an annual fee.
But the worst part of Ms. Schlesinger’s post came in the comments section. A reader named S. Howard-Sarin wrote, “As someone with a functioning mailbox and a paycheck, I certainly feel the credit card industry offers *too much* credit! … if I could choose between a credit card with a $100 annual fee plus a guarantee of no rate changes, versus a free card with a floating rate -- I'd pick the annual fee.”
Ms. Schlesinger herself responds with the following: “Really? I'd rather let the dopes who are late-payers float my free and easy access to credit. Their stupidity funds my convenience.”
Spoken like a truly oblivious millionaire, and she seems to utterly miss the point of the legislation in question. The credit card industry has been generating billions and billions of dollars of revenue via often tricky and misleading practices. The reason why the “dopes” fund your convenience, Ms. Schlesinger, is because the deck has been stacked against them for many years. This legislation levels the playing field a bit—though not completely—and ultimately that may mean that the credit card business will no longer be the most profitable sector in banking. They’ll still make money, just not as much. So be it.
Ms. Schlesinger, perhaps, spends too much time in the world of Wall Street, and might be served by spending a bit more time down on Main Street, with us “dopes.”
2. A New Kind Of Child Abuse
We’re all for financial literacy (obviously), but on vacation? Disney (Stock Quote: DIS) recently announced that it’s partnered with T. Rowe Price (Stock Quote: TROW) to launch a new “entertainment experience” at Innoventions at Epcot Center. It’s called The Great Piggy Bank Adventure and it sounds just amazing:
“At the INNOVENTIONS at Epcot experience, family members work together as they play a series of entertaining, hands-on games that illustrate and convey the financial lessons. After choosing a dream goal, players go through three different interactive activity stations where they direct coins into savings and away from spending buckets via a touch screen, move levers to ride the currents and capture falling coins before they’ve been reduced in value by the evil wolf and his sinister inflation machine, and spread their coins around hiding places as they try to avoid the wolf and learn the value of diversification. Along the way, players are guided by a talking piggy bank who offers guidance and education to reinforce the lessons and help them collect enough coins to reach their goal.”
Parents, if you’re lucky enough to have a family vacation at Disney World this year and you force your kids to do this when they could be riding Space Mountain for the 14th time, they will never forgive you. Beyond that, the The Great Piggy Bank machine would probably tell you to avoid expensive vacations, which would be pretty awkward, no?
T. Rowe Price, if you want to win over a bunch of Disney vacationers, why don’t you just buy everyone a character breakfast. They are awesome and for years to come parents and kids will associate your fine financial brand with pancakes shaped like Mickey Mouse’s head.
3. Glocks at Yellowstone?
Finally, returning to the subject of Congress's credit card reform legislation: Tucked into the credit card bill is an amendment that will make it legal to carry concealed weapons in national parks and wildlife refuges. (Which only fuels rumors that the amendment's author, Sen. Tom Coburn, R-Okla., has a long-standing grudge against Yogi Bear.)
We’ve been trying to come up with a goofy metaphor that ties together credit cards, national parks and hand guns, but so far the closest we’ve come is a “Big Buck Hunter” game console that accepts Visa. Weak. If you’ve got something better, please leave it in the comments section.