Overspending, Not Credit Card Fine Print, Is The Problem

Here’s Megan McArdle at The Atlantic responding to an interview up with Nick Gillespie of Reason on the proposed Consumer Financial Protection Agency:

A consumer financial protection agency is not going to do much to help consumers. It is true that people don’t always understand all the terms in their credit card contracts or mortgages.

The problem is, it is almost never the tricky hidden terms of those loans that get people into trouble. People get into trouble because hyperbolic discounting, or an insurmountable crisis, leads them to borrow more money than they can reasonably pay back. By the time a 5% increase in your credit card interest rate spells financial ruin, you’ve been in deep trouble for several years.

So if the CFPA confines itself to ensuring full disclosure, this will not much help consumers, because the terms that matter are already disclosed, i.e. that you are borrowing money and will have to pay it back with a high rate of interest.

Too many people look for somebody to blame for their inability to control their own spending. Yes, credit cards and banks maintain usurious policies to snag the unsuspecting. So, don’t be unsuspecting. Get a no-fee card, limit your spending, and pay the full balance each month. If you do that, you get an interest-free loan each billing cycle, and the joke’s on the bank.

This entry was posted in Uncategorized. Bookmark the permalink. Both comments and trackbacks are currently closed.
  • The Kelly Letter
    A Complete Investment Management System
    The Kelly Letter  every Sunday morning by email.
    Like no other. Many subscribers say this is the best read of their week, astonishing in its ability to distill seven days of noise into one succinct overview of the very few items that might matter. Start your Sundays right!
    A one-page Quick Start Guide
    with page number references to full information in The 3% Signal. You'll receive access to this right away so you can begin transforming your portfolio into a performance machine immediately.
    The 3Sig Calculator.
    A thing of beauty! You'll use it to generate your own personal signals every quarter including exact share amounts to buy and sell based on your account balances. It emails you the results to make later quarters easy by keeping last quarter's numbers at your fingertips. Some subscribers say this tool alone justifies their subscription price.
    The subscriber-only section of this website
    where likeminded investors are commenting on notes and discussing in forums. Jason joins these interactions every day. They're a treasure trove of investing tips and wisdom.
    The archive of Kelly Letter notes.
    It’s a research center, searchable and smartly tagged to make gathering time-stamped material on covered subjects easy.
    The subscriber podcast.
    Jason reads every letter word-for-word. This feature was requested by subscribers who prefer audio learning. They listen on their Monday morning commute, during a workout, or while reading along at their computer.



    $200/year
    Save 17%



    $20/month
    Pay as you go
    Or sign up to receive free email and learn more about the system.
Bestselling Financial Author