Defense Against The Dark Arts: Devilishly Tricky Credit Cards
This article was almost titled: Why I HATE Credit Cards… And Why I Still Have One. Obviously a lesson against the Dark Arts makes more sense. #stillwaitingformyHogwartsletter
Credit cards freak me out. They always have. Have you ever heard anyone accuse another person of spending on a credit card, as if it was the most sinister thing they could do? Personal finances are deeply personal, and there are TONS of emotions and opinions tied to finances because of this. But for me, personally, I only use a single credit card to fill up my gas tank because I understand they can be a helpful tool in a real emergency, but that they also come with great risk.
The Dark Arts
Banks know that where there is risk, there is also reward. You and I might pay off our credit cards completely, but most Americans do not. Here are two very sobering thoughts:
More than half of Americans with credit cards do not pay them off every month.
Worse, those are December 2018 numbers from a Fed survey. Before COVID. When 44% of Americans couldn’t afford an unexpected $400 expense (in May of 2017).
Can you imagine what these numbers will total up to be after a year of pandemic household fiscal turmoil?
Whoever invented credit cards has made billions and billions off of people. Usury, any one? Ignoring any sort of religious aspect, the word itself sounds like “using” someone. Because… that’s exactly what it is!
USURY:
n.
the practice of lending money at unreasonably high interest rates
Like I said, credit cards freak me out. They’re designed to seem completely reasonable, no interest if you pay it off! But they’re also designed to prevent losing out on their funds. The lenders know some people will pay off their balance every month. So what did they do? They shifted their sights to those that couldn’t pay them off… and made the interest rates so high that they could run their business off of these people. Like I said before, usury, anyone?
When I hear debt as a form of slavery, while it might initially sound like an extreme parallel, but I can absolutely see the point trying to be made. I think serfdom is a closer fit: the illusion of free choice but in actuality, very limited options are available.
Indulge me with this quick little interlude. I did a little research years and years ago into the drug trade. It fascinated me because of how complex the issue is! One of the anecdotes I collected along that research was that a narco kingpin had supposedly made a claim that if he sent 10 airplanes full of cocaine to the US, if the illicit cargo of only one plane made it onto the streets of New York, he would still make a profit, even if all of the other planes crashed and burned.
9/10 people might pay off their credit cards, but that one that didn’t is paying nearly a 20% interest rate to keep the infrastructure running to stay in business. Unfortunately, its every five or six of us out of ten that aren’t paying off our balance every month. Seems like we collectively need a Defense Against the Dark Arts lesson.
I Don’t Want Temptations That Suck My Life Energy
“Would you like to open a store card and save 20% today?” the nice cashier asks as you are about to swipe your card to pay your balance. You pause. 20% off… is it worth the hassle of forking over my information… I don’t really have time for this but 20% would be nice… As you’re thinking the pitch continues, “…you’ll save at least 20% 12 times a year when you pick your monthly shopping date…” Hmmm, I do shop here a lot…. and then the kicker, “but I say at least 20% because when you arrive, you get to pull a scratcher that might save you 30% or even 50% that day. Plus you get Black Friday sale prices a full day earlier than the general public!” “Sure, I’d like to sign up,” you hear yourself saying as you spell out your name to start the application.
Devilishly tricky, indeed. That spell was a complete success! Maybe you do enjoy shopping at this store, so a credit card wouldn’t be so bad. But maybe you only shop here so two or three times a year. Now, you’ll be tempted “just to see what they have” every month when your coupon reminders hit your inbox and your mailbox. Maybe you just check online and re-order your favorite whatever in a new color in the same size as the one you’re wearing right now. Or maybe you’ll go in this weekend, during the whatever sale. Maybe a year later you’ll find that you incrementally shifted your budget for this line item, from $20 a month, to later $50, and then to $200, because, well, you bought your Christmas gifts for yourself and a few other people here. Did that shift to $50 a month happen after you opened that new card and got all those “sale” and “coupon” notices?
And that’s assuming you have a budget, and that you track things like spending in certain places. Lots of people don’t like to budget.
Let’s explore a real life example. I have been considering the Amazon Prime card for while. We homestead, so Amazon delivery is very convenient. It’s over 30 minutes just to get to most box stores, then however long you’re there, plus the drive home. It’s an event. We get to skip that hassle and just have cardboard boxes arrive on our porch a few days later with our paid-for goodies. I totaled up our Amazon spending for last year. It was embarrassing for me to admit because the total was staggering. However, I felt no embarrassment whatsoever making those purchases.
You see, I get the spending sweats. It’s not a magical abnormality, its just what I call them. When I’m walking through the store with items in my hand, or about to press ‘proceed to checkout’ online, I get really tense. I’m about to part with my hard-earned cash. Do I really need these items? Are they really worth what I’m about to pay? I scrutinize all of the things, and it makes me sweat. Is it worth forking over my life energy to pay for these items? (Fun fact: if I’m buying something for someone I care about, as long as the price is reasonable, I don’t think twice about it!)
With online shopping, I add things to the cart and they sit there for a while. When I go to make a purchase, I often move things out of the cart to save for later, or delete altogether if it doesn’t meet the scrutiny I mentioned before. I don’t get so sweaty without the pressure of standing in an overly-lit public place with people staring wondering why I’m spacing off while standing in a walkway.
Even though I was intentional with purchasing things of value for our family, I still spent over $4,000 via Amazon last year. I promise you that if I had been tempted to spend more, you know, to get more back, than I did. I would have been tempted to keep more things in my cart than I did. I would have spent more. I would have bought those cute shorts with pockets, rather than vowing to make them myself this winter. I would have bought that special shirt for gardening, even though I have dozens of shirts already, that I have no issues gardening in… you get my point.
Granted, I would have spent this money at Target or other stores, but most of it was funneled through Amazon because I wasn’t driving to town for work (teleworking because of the pandemic). It wasn’t uncontrolled, emotional shopping. Well, to be fair, I can get sucked into that pit, but that’s why I am so willing to click delete or save for later!
Having a credit card to get perks might motivate you to use it more than you otherwise would. It’s easy to find yourself rationalizing that purchase, because you’ll get XYZ back anyway. I get the spending sweats because I’m evaluating my potential choices against my life energy, and my values. Deep thinking for standing in the store, right?
Uh, Prof, Life Energy….?
Right. Sorry. I’ll stop professing so much. But great question. Life energy.
Vicki Robin shows how hard we work to earn some money by showing us how much our life energy is worth in Your Money or Your Life. You’ve probably read this text in your Muggle Studies courses. If not, I highly recommend you catch up with this reading! Essentially, most people spend their time, talent, and energy at their jobs to collect paychecks in order to pay for everything they want and require. But, they have to dress up to go to that job, pay transportation costs to get there, and often they have other expenses that are related to working life, but not necessarily directly related to the job. For example, a couple might stop to pick up a cooked meal on their way home, and then spend dinner talking about what jerks their bosses are, as they pour a few glasses of wine. The money spent on food and wine, and the time they are decompressing from work, would be all be subtracted as a cost when converting the paycheck into life energy.
I Don’t Want to “Give Up” My Life Energy Without a Duel
I’m not sure if you caught that credit card interest rates can be nearly 20%. Sure, yours might be 16.6%, but that’s nearly 20.
US average household income is just over $60,000
Kinda crazy the banks charge the same rate as Uncle Sam for most people, right?
Anyway, back to dueling to protect life energy. Every year, without fail, sometimes even twice a year, the one credit card I have increases my credit limit. I accept this dueling challenge, and I victoriously reduce my credit limit. Simple!
A modifier to Expelliarmus specific to reducing your credit card limit
Your credit limit is not, in any way at all, linked to your checking or savings account. Put another way, how much borrowers will lend you, is NOT based on how much you have in the bank, which would seemingly make the most sense. Nope. How much they are willing to lend you is based on some Dark Arts. Reducing your credit limit is a very easy Defense measure that you can take to increase your likelihood of being able to repay a statement’s total balance.
We have a savings account worth a few months of expenses for emergencies. For actual emergencies. We don’t touch it otherwise. I keep the credit card open and active by using it pay for gas at the pump, just to keep the account active. Autopayment is on, but I still check a couple times a month to make sure there are no issues. In fact, I almost always pay it myself as soon as I see there is a balance, just in case there are… “errors” with the autopayment processing.
Since the savings account is for emergencies, the credit card is only an emergency buffer. I cap my credit limit equal to one paycheck’s income. This is not a recommendation, personal finances are personal after all, but let me tell you why. Having a few months of expenses saved up is a really nice cushion because it enables us to keep our cool even with bad news. It buys us more time to move things around, change course, or make a move, if need be. An emergency I might use the credit card for would be a no-notice flight to help a family member. Could be a pricey flight, but I’d only buy one-way until I knew when I’d be coming back. Since we don’t have family overseas, I don’t see this being thousands and thousands of dollars. I could book the flight, we could make more plans, and I could move the emergency savings money to pay of the credit card after it posted, done. I could put the whole next paycheck back into savings if I wanted, or spread it out over the next few months to regrow that balance.
Reducing your credit limit is a very simple dueling skill. You use your calm, rational energy to reduce the impact of a potential attack. If you do not set up this defense to prevent paying around 20% on a possibly very high dollar credit limit, that you might not be able to pay off in full, could have devastating consequences to your life energy.
The Curious Effect of Warped Time
I know, I know, right? How could credit cards get any worse? You’ve already said they can be very expensive, they can tempt you into spending more than you otherwise would, and that they might be willing to loan you more money than you have money in the bank to repay them with!
Some of you might have heard about a Time Turner in your Charms studies. While such devices are strictly regulated by the Ministry of Magic, they have been quietly used throughout history to tweak historical events. Part of the magic of the charm is that any such influencing activities must be conducted without a witness.
Credit cards also seem to have some sort of charm spell that warps time, however they are not regulated, nor even monitored by the Ministry, and any such use of the credit card is quite plainly public. Yet, curiously, the credit cards have a distinct time warping effect.
For example, you may quickly check your credit card balance online, and note that you have spent $200, but that you still have $600 in available credit. That might linger in the back of your mind the next time you reach for your wallet to pay for an item. If the thought surfaces, you may swipe your credit card, because you ‘still have room’ on this card, rather than pay with your debit card like you might normally. This is especially likely if you earn rewards for swiping for this particular transaction.
Suddenly, when you review your credit card statement, you’re confronted with the reality of a $350 bill, when you had mentally only stored the $200 benchmark. Having forgotten about the second transaction, as if that moment was completely wiped from your memory until seeing that statement, you are immediately alarmed as you realize you did not adjust your budget. With no funds in your checking today, to pay for that expense from a couple of weeks ago, now your future income is suddenly required to pay for today’s expenses.
Not only did this mysterious time warp alter your present circumstances, based on a glitch in the past, but now your future self is also strangely twisted into recouping and recovering for your present self.
Credit cards are the ultimate consumer time warp. Having “room” on your credit card for a purchase does not mean you have equally available funds in your checking account to pay off the bill. If you do not monitor, track, and budget for each transaction, a swipe here or there may add up and surprise you. The results may lead to stealing life energy from your future self.
Muggles have been known to preserve such charms as Time Turners as forms of an inheritance from their elders, perceived simply to be a unique piece of jewelry. Investigations are continually ongoing to collect and protect these unique charms from haphazard enchantment. Some have wondered if a clever Muggle may have tapped into the Time Turner energy and incorporated that into the credit card industry, however it is far more likely this was done by a Death Eater based on the devastation credit card misuse has done to Muggle families. Time Turners are a far less likely scenario, however I did not want to gloss over this possibility.
Defense Measures Re-Cap
In case you drifted off, these items will be on the exam so you might want them in your notes. Note: This is not advice, for entertainment and educational purposes only!
The best Defense against these tricky devils is to avoid using credit cards as much as possible. Limit the number of cards you have, and reduce temptations by using cards with universal benefits rather than store benefits. Don’t permit those temptations to drain your life energy. When you are notified that your credit limit was raised, call and lower that limit to protect your life energy. Remember, your credit limit does not correspond to the balance in your checking or savings account, or your known financial capacity to pay back that amount. If you do use them, pay them off immediately, rather than waiting until the end of the month when the statement hits your inbox. Keep your guard up; protect your life energy. There is a reason the great Professor Moody preached the importance of vigilance!
For further study on this topic beyond today’s lesson, consider the ‘get paid today, just give us your paycheck when you get it’-type loans. Instead of a 3-5% mortgage rate, or maybe 4-8% car loan rate, credit cards often nearly hit 20%. But PayDay-type loans can be +300% or even over 500% when calculated annually. These loans are made to the most desperate among us to legally acquire cash. I suspect these devices must have been the doing of He-Who-Must-Not-Be-Named, but we will discuss Defense measures against such Dark Arts in a future section.
