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frozen-credit-cardThe PBS – Frontline – New York Times special on credit cards titled “The Card Game” was recently discussed in a post on The Atlantic by Mike Konczal under the title “How Credit Cards Rob the Poor to Spoil the Rich”.

Konczal poses that since “the most affluent consumers pay the least, while the poorest pay the most” (in fees and finance charges) then that somehow equates to the credit card companies “robbing the poor to spoil the rich” or as a risk modeler told Felix Salmon:

“The industry is just a giant wealth transfer mechanism from poor people to wealthly people. The profits from below (subprime) serve to subsidize the interest rate and rewards cost of people in the ‘super prime’ category.”

Really?!?

Have we actually arrived at the point where it is too politically incorrect to just come out with the facts and say that the reason people pay higher or lower fees and finance charges is caused by their very own personal financial responsibility?

Sure, there is absolutely a positive correlation between income and credit card rewards/perks/lower interest rates because the more money you make then the less of a chance you will default on your credit card debts and make late payments BUT no matter what your income level is if you consistently make late payments, default on other loan obligations, go into bankruptcy, and just generally make irresponsible financial decisions then guess what? No matter how much money you make you will face lower credit card rewards/less perks/higher interest rates.

While Mike Konczal’s article certainly illustrates the ridiculous notion among many liberal leaning writers that things like working hard, managing money responsibly, and becoming wealthy (otherwise known as the American Dream) should be an effort that is punished rather than rewarded it is refreshing to see some people immediately add surprised comments to the article:

“Seems more a transfer from the ignorant and foolish to the informed and prudent – certainly something I feel should be incouraged. “jmo3

“It’s “Encouraged” and it’s clear on which side of the “to” you belong. The entire economic system in the US encourages wealth to travel from the poor to the rich. While this may be satisfying to the increasingly rich it results in an underfunded government that as we have seen, can be had at bargain prices.”KennyBoy

(I just have to interject here that why should it matter which “side” one belongs to? If someone is arguing for racial equality for blacks then should all of their arguments in support of racial equality for blacks be discounted simply because they are black? No, of course not. To do so would be absolutely prejudiced (not to mention a red herring of Appeal to Motive or even an Appeal to Spite for that matter). Why then should it matter whether “jmo3″ is mega wealthy or dirt poor?)

I think that this commenter sums everything up quite nicely:

“More specifically, a transfer from those who pay their bills on time to those who don’t.”KTL

What do YOU think?

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One Response to ““The Card Game” Makes Personal Responsibility Politically Incorrect”

  1. Allan Olley says:

    Any adversarial analysis is I think a mistake.

    Basically if people are carrying a a balance without a good enough reason then they are lowering the savings rate for no benefit. Now a good reason would be absence of a sufficiently cheap (considering all costs) alternative loan combined with either sufficient personal gratification by immediate spending or some productivity enhancing investment.

    If the savings rate is lowered then the interest rates go up and since we all pay interest (or its equivalent) either directly or indirectly (usually businesses use some loans for financing at some point thus causing them to need to pay interest) we would all be hurt by lowering the savings rate. A few can benefit from the situation that harms everyone since the cost per person will be small, which is unfortunate because it gives them reason to oppose the general welfare.

    So in so far as some people lack the information or discipline to actually ensure their loans make sense we all lose and we all have reason to further reinforce the opposite outcome if we can find ways to do so. The question is more whether such means are really at all apparent and what the details of them might be.

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