With the implementation of its latest effort to save you from yourself, the federal government brings to mind a “Saturday Night Live” sketch from a couple years ago.
It’s a faux commercial in which a huckster offers up a simple solution to people suffering from stifling credit-card debt: A book titled, “Don’t Buy Stuff You Cannot Afford.”
Husband: “I think I got it. I buy something I want, and then hope that I can pay for it, right?”
Spokesman: “No. You make sure you have money, then you buy it.”
Husband: “Oh, THEN you buy it. But shouldn’t you buy it before you have the money?”
Spokesman: “No-o-o-o.”
We know, we know, that sounds like a novel concept these days. In an age when credit-card debt often is viewed as a necessary by-product of the American Dream, consumers seemingly are their own worst enemy.
As of late 2008, Clark County residents averaged four to six credit cards apiece, with $6,194 in credit-card debt. Considering that many responsible people maintain credit-card balances of zero, it is shudder-inducing to think of how many local residents must have debt totaling $10,000 or $20,000 or more.
With that in mind, we welcome the complete implementation of Congress’ credit-card reform. The final phase of the law, which was enacted in 2009, went into effect this month. And in case you haven’t been able to demonstrate any self-control or the ability to act responsibly, here’s what you need to know:
• The law limits how much credit-card companies can charge for late payments or over-the-limit purchases. If you are late on a $20 payment, for example, the fee cannot exceed $20.
• Some fees charged by companies are now prohibited. For example, consumers cannot be charged an inactivity fee for not using a particular card.
• A limit has been placed on rate increases. If your company raises the rate on a card, it must explain the reasoning, and it must review the increased rate every six months.
Each of these is necessary, but the important thing to remember is that all of the new laws become moot if you manage to pay off your credit cards every month. And they are moot if you don’t buy stuff you cannot afford.
Last year’s credit reform legislation can be viewed as an example of a nation that increasingly excuses irresponsibility. Yet one facet of the law that went into effect this month should be roundly applauded: the protection of gift cards. The new rules ensure that gift cards retain their value for at least five years, and they limit the fees that retailers can impose upon such cards.
And while the federal government has determined that consumers are merely powerless pawns at the mercy of big, bad credit-card companies, there is some good news. On Wednesday, CNN reported that Americans’ credit-card debt had reached an eight-year low after dropping for the fifth straight quarter.
And as Reuters reported earlier this month: “Delinquencies, an early warning sign of future losses, have fallen at most lenders since the start of the year. The July decline suggests that U.S. customers are managing their debt despite an uncertain economic recovery and high unemployment.”
Short of an epidemic of financial ruin, it is possible that the ongoing recession will provide some positive outcomes. It is possible that consumers will develop a new sense of austerity and responsibility, recognizing that credit cards do not equate a bottomless well of financial security.
Probably the most financially responsible — and therefore prosperous — generation in American history was the one that grew up during the Great Depression. It is no coincidence that this age group understood the importance of not buying stuff you cannot afford.
It’s a concept worthy of embrace.
