Burton on the Bay

By Bill Burton

Loan Sharks Got the Biggest Gifts of All

Paybacks are hell, aren’t they?

—Former Maryland governor Marvin Mandell to State House photographer Lee Troutner

It was about 30 years ago I heard those words for the first time, and for Lee Troutner the payback was truly hell. The governor, a true and capable sport in both hunting and fishing, implemented his payback policy as he, the late Frank Harris of the Governor’s Office, and I were hunting a field goose blind near Wye Institute.

The Canada geese were accommodating that bitterly cold and windy day back when the daily bag limit was three. But on a few occasions, the governor, Frank, Lee and I were enjoying good conversation as a few shootable honkers winged by. We didn’t get a shot off. We were too busy talking.

“Snooze and you lose,” chirped Lee. After we missed the chance at shooting a nice flight almost close enough that we could have reached out and grasped a few goose legs, Lee again repeated this line.

“Lee, I’d like a few shots of us firing at some geese,” said the governor. “So why don’t you go out and lie down on that nice frozen ground and get some pictures.”

About a half hour later as we remained seated within the protected confines of the blind, Gov. Mandel looked out at Lee who was frozen almost as stiff as the soil he was lying on. Paybacks can be hell, he reminded him. Then added, “You can come back [into the blind] now.”

Brother Burton’s Crash Credit Course

I thought of that episode on New Year’s Day past. I had gotten through the holidays without charging to my credit card a single thing — other than a sweater I purchased for myself on a Kohl’s card. I could feel the radiation of self-satisfaction. Other than for the warm, woolen maroon sweater, there would be no paybacks for me. For other gifts, I squeezed out enough cash.

Can you say that? If my brother was your brother, you could.

My brother is John Robert Burton, Ph.D., professor emeritus of Consumer Policy and Protection of the University of Utah, Salt Lake City. I phoned John in early December with a few questions regarding information sent me about the one active bank credit card in my wallet.

I have another bankcard that lies dormant in the event of an emergency and a few gasoline and department store cards. But being a survivor of the Great Depression, I prefer to pay via cash, check or the debit card that immediately takes the cash from my checking account. As a boy I witnessed what happens when people go into hock. Burtons always paid cash.

“You can quote me,” said brother John: “The credit card industry is the most morally corrupt big business in the United States. The consumer doesn’t have a chance.”

I wasn’t one to know much about buying via plastic, though I was among the first to sign up with American Express about 40 years ago. So I was in for a rude awakening. In my brother, I had gone to an expert on consumer woes. Even he admits he can be stumped trying to interpret some of the gobbledygook in credit card contracts.

So don’t feel like an idiot if you can’t figure out the fine print. John said all he and three other professors in the field could do was shake their heads after trying to understand a paragraph in a contract explaining how interest rates and billing cycles are computed. Methinks, the contract (which a credit card is) is like a mushroom:

A mushroom grows in the dark — and you know what it grows in.

After reading a four-page briefing John sent me along with a rundown of equal length published in Consumer Reports, I paid off the low balance on my bank credit card. Methinks those using bankcards are merely chattel of the lenders who, since deregulation, have all the power and authority. We have neither rights nor egress — nor understandable (or even pertinent) information.

Traps of the Trade

Some of the things I learned:

• Teasers: The bank is doing you no favor when it increases your credit line because you are “a good customer.” This self-serving device generates more profits from higher balances.

• Promotions: If there is a promotion with a low teaser rate, this rate will likely disappear soon. The contract reserves the right of the issuer to raise the rate; all it needs is to give you 15 days notice. Also, many promotions read “as low as,” which means only select consumers are eligible.

• Courtesy Checks are not very courteous. Building up to Christmas, card issuers inundated me with blank checks, urging me to buy whatever I wanted. But I had to pay a fee up front to use those checks as well as a much higher interest rate. There is no grace period for interest accruing. Also, if the checks are stolen, it can take days to straighten things out, and your credit rating is at risk.

I tried to have these mailings stopped, but via the snail-pace voice mail process issuers use to handle most business, it was virtually impossible to connect with the right person. I was switched from here to there and back again.

• Unfair Penalties: John calls punitive interest rates one of the most “insidious practices” with credit cards. If you pay late or exceed the credit line just once, your interest rate will approximately double. Until last year, you had to err twice before incurring penalties.

• Fees, Fees and More Fees: While it costs banks very little for late payments, returned checks and over-the-limit purchases, with most banks the fee is now a whopping $39 and possibly a big hike in interest rate. What’s more, some issuers are now charging for not using your credit card for six months. Because fees amount to half their profits, issuers keep jacking them up. Recently companies have doubled the fees for purchases in foreign countries.

• Interest Rates: Promising us a low fixed rate, then getting us to pile up the bill can get us into big trouble. Remember that rate can be changed with 15 days notice. The interest rate we pay is not only a reflection of the market rate, but of our own credit record as well. Even If we pay the issuer religiously, if we are a day late in making a car payment with a lender not even related to a our credit card company the latter can raise the interest rate well above the market points.

All of this is only the tip of the iceberg. I don’t have enough space to detail the many other aspects of how we’re being ripped off via the bank credit card schemes of late — which prompts me to wonder, angrily, how our legislators could have sold us out to banking interests.

Christmas has come and gone, and the loan sharks got the biggest gifts of all. Paybacks are hell, aren’t they? Enough said.