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Ralph Nader: The Cash or Credit Conundrum

Ralph Nader has run for President of the United States as a Green Party candidate, and more recently as an independent. The piece below is posted to www.nader.org, and was sent out to a Nader e-mail list on October 5, 2009:

The Cash or Credit Conundrum

Consumers rejoice.  Floyd Norris has just penned a piece for the New York Times titled:
“Rich and Poor Should Pay Same Price.”

Mr. Norris said, it seems “absurd to have a system that requires people who do not use credit to subsidize those who do. You know there is something wrong when a middle-class person can get a part of his purchases refunded by the bank, or can collect miles good for free airline tickets, while paying the same price as a poor person who can get none of those benefits.”

Mr. Norris is on to something important.  He reminded me of an article I wrote in December 1985. I asked readers of my weekly column to consider some of the pitfalls of credit card purchasing.  I noted that the big banks relentlessly promote credit card usage without adequately presenting the downside of credit card debt.  I asked readers to imagine seeing a television presentation by an organization known as the “Cash Payment Fans of America.”  The made-for-television production sponsored by this imaginary organization would ask viewers to consider some counter-marketing advice with the following declaration: “Credit Cards: Maybe You DO Want to Leave Home Without Them.”

Law Professor Adam J. Levitin, in a 2008 article in the Harvard Journal on Legislation reports:
“On average, credit card transactions cost merchants six times as much as cash transactions and twice as much as checks or PIN-based debit card transactions.” Professor Levitin also notes that in 2006 “U.S. merchants paid nearly $57 billion to accept payment card transactions, which makes this component of the payments industry larger than the entire biotech industry, the music industry, the microprocessor industry, the electronic game industry, Hollywood box office sales, and worldwide venture capital investments.”  These are stunning observations.

Alas, our collective imagination may not yet have evolved to the point where we can consider a day without VISA and MasterCard.  The buy now, pay later credit card cabal knows few bounds.  The credit card vendors want you to forget that using a credit card means you are borrowing money and that you must repay what you borrowed with interest.  And, the interest rates can be staggering.  Until recently credit card companies could charge annual percentage (APR) rates of up to 36 percent.  And, the fine print in your credit card agreement might allow   the “merchants of credit” to charge membership fees – described as “participation fees,” “maintenance fees,” or “activation fees” – on top of the interest fees.  And don’t forget the “transaction fees,” for getting cash with your card, the fees for exceeding your credit limit or for making a late payment.

Ed Mierzwinski of USPIRG, a consumer watchdog organization, monitors the credit card racket and the slippery practices of banks that gouge consumers with a variety of fees.
USPIRG notes that credit card issuers have tricked consumers by:

1. suddenly advancing long-standing regular due dates by five days or more to trick consumers into paying late;

2. arranging for due dates to fall on weekends and then claiming that bills received after 12 noon or 1 pm were late;

3. imposing late fees not only when bills were 30 days late, but as little as one minute or one day late; and,

4. raising the interest rate if your credit score declines.

Fortunately, some of the most egregious credit card abuses will be eliminated by legislation signed into law on May 22, 2009.  The Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009, while not perfect, will generally require 45-days advance notice of any rate increase or any other significant changes in account terms, up from 15 days, and card issuers will have to inform consumers of their right to cancel their card before rate increases or account changes take effect.  Credit card statements must also be mailed out 21 days before they are due.  The new law also limits some interest rate hikes for late payments.

Unfortunately, the problems associated with getting on the credit card treadmill are still     overwhelming.  Despite some modest legislative reforms, too many credit card issuers are still predators waiting to pounce.  Representative Peter Welch (Vt.) and thirteen House co-sponsors  have introduced the “Credit Card Interchange Fees Act of 2009.”  This piece of legislation is designed to limit some of the fees credit card companies charge retailers and shed some light on the costs of credit card transactions to consumers and merchants.

Consumers can make some additional waves themselves by pretending they have joined “Cash Payment Fans of America” and for one week paying with cash for goods and services.  The results could be illuminating.

12 Comments

  1. Edward HC Graydon Edward HC Graydon March 6, 2022

    The issues Ralph Nader talked about with regards too predatory lending are compounded by what is happening regardless of country regarding homelessness .

    I applied for a line of credit a few weeks ago through the Bank of Nova Scotia in Canada I applied under my birth name Edward HC Graydon the terms where really very good and I am pleased with how professional the Bank of Nova Scotia staff really are! I am not here to plug the Bank of Nova Scotia but to make an analogy !
    When I applied for a line of credit I did it online and almost all of the details required the bank sending first a set of checks to the house, then over time a Scotiabank Visa card that allows access .They broke it down due to security reasoning . Actually they did a great job and I was really impressed!
    This being said when so much banking is done online and in conjunction with the need for a permanent residence regardless of country it does appear such a over whelming issue that perpetuates homelessness and poverty . It is hard to do online banking when one lacks the means and tools of the trade to do so!
    Reply
    Edward HC Graydon
    26 days ago
    Is it only philosophical thinking to try and make a connection between those that go without power and those that lack basic access too banking due to a lack of access ? I know that those in Conakry, Guinea lack so much more but access is access ,and it is my humble opinion that the banking system and its transformation into mostly online services leaves so many unable to participate. Regardless of lack of actual power to drive the economic growth and education in Conakry, Guinea those that are homeless and lacking access and the ability to show stability to the banks suffer the most in basic needs . Power is the power ! And the ease of access by so many seems only by the grace of God ! So look upon your ability to have access as a blessing! And try and use the gift of access wisely and sparingly. As it is a gift.
    Reply
    Edit
    Edward HC Graydon
    2 months ago
    For years, I took energy for granted. There’s no telling how many times I walked into my office, flipped a light switch, and powered up a PC without thinking at all about the magic of getting electricity any time I wanted it. But then I started traveling to poor and middle-income countries, and I had a very different experience.
    I concur and it is for this reason I became a Gates Notes Insider”.”I once was blind, but now can see that the world is more than me”!
    Once you are effected by what you see in the rest of the world it is hard not to write out your thoughts as by not doing so you remain silent to inequality.
    That is why in other posts to your site I have argued the coalation between censorship and climate change along with inequality.
    Without power it is hard to express yourself in the modern world.
    Reply
    Edward HC Graydon
    55 days ago
    Today is January 9 2022 and this morning I went for coffee at the local Tim Hortons that is open 24 hours ,I left my place at roughly 5.30 and after paying at the drive threw I pulled forward and was approached by a person who happened to be female who asked me for a ride to where she was going ! Her neck and back “right off the bat” seemed misaligned . She seemed in very ,very rough shape and I was not crazy about giving this person a ride but I did and on the way to where she was going she told me she had just been released from the hospital after having neck and spinal surgery and that she had a hundred stitches and metal clamps in her neck and spine . “She was in horrible condition” She said she was mentally and physically exhausted ,and rightfully so!
    I gave her a ride and again if you are able to sleep at night at night without having to walk the streets at night you should consider yourself lucky.
    The homeless situation in Canada is out of control and the pain and suffering felt by many seems apocalyptic .
    She called me an angle for giving her a ride, while I professed I was the farthest thing from it .
    People are hurting regardless of where on the planet and it seems as though politicians are blind, ignorant and dumb.
    Edward H C Graydon
    Reply
    Edit
    CaliforniaHal
    Edward HC Graydon
    Edward HC Graydon
    4 hours ago
    Pending
    For people that are prone to enjoying banking above and beyond basic banking those that thrive on pointing out the errors by some banks in order to reduce any personal output that could have related to fees only to have them reversed by taking the time involved find access during the last few years daunting .
    The customer service at the branches for in person dealings is close to none existent for many. The transformation to more online banking is leaving many people in very precauious if not financial dangerous position . I have been writing about the discrepancy in access to banking over the last few years and the issues the homeless have in accessing the banking system . I have witnessed first hand what appears inequalities so derogatory on a whole that affect Canadians regardless of where in the country. In order to argue a” penny saved it a penny earned “ one needs to be able to point out and bring those concerns to the banks and that is not easy or actually possible when one does not have access. Capitalism and the system that facilitate materialism.The banks! Are designed to take advantage of those in need without concern or empathy . So when people find themselves in a position of needing to address service changes attributed to over spending or lack of personal attention to the details surrounding the account the banks are prone to applying predatory lending by raising fees and tacking on more service charges.
    Regardless of where in Canada the banking system is hard for many to navigate with a result that benefits the client.
    This coming from someone who has a great deal of personal and litigious experience when dealing with the major banks. The societal disregard for the poor is in fact the biggest issue facing Canada and not the banks. When I look around I see poverty everywhere at a alarming increasing rate. I will say that the banks do a tremendous job in Canada of keeping accurate accounts and details pertaining to clients …It really is amazing how detailed they are. But true ultruism by politicians has been lacking in Canada regarding the poor and homelessness perpetuating the issue .
    It is tough to have access when you lack the basic tools in order to do so!

  2. Edward HC Graydon Edward HC Graydon December 9, 2021

    Who could have predicted the situation the world now finds itself in? I now believe the pressures of debt and the lack of access to it, is now a major problem . I believe that the figures are false and or seriously flawed when the banking industry {at least in Canada } and more than likely America as well states that debt levels are down since covid ….This is almost unquestionable inaccurate in my opinion .

    When countries who legalized weed use as a recreational drug while allowing to do so via credit card use, set a dangerous path to financial destruction . When I consider the addictive attributes that weed presents to the consumer by way of repeat business I see hypocrisy by governments in an unbearable obvious way . Those industries in Canada at least should be regulated to only debit in my personal opinion has according to all government accounts drug use has sky rocketed while unemployment is percarious at best! Makes me contemplate the possibilities that in fact debt loads on credit cards because of drug addiction has in fact climbed for many . Take the drug of choice and credit will help facilitate the transaction .This is ,I believe a big issue in 2022. I am countering the rhetoric by some that Credit card debt loads are down,as I believe nothing allows in this day and age that allows on average for that to take place.

  3. Edward HC Graydon Edward HC Graydon October 13, 2021

    Today is October 13, 2021, and in the time frame from then until now the situation regarding fees and what constitutes predatory lending is becoming very fine tuned by the banks regardless of country . The situation regarding fees is at the point of basic human enslavement to capitalism ! In the 12 years since Ralph Nader wrote his opinion things have become much more impersonal at the branches and decisions are made much more centrally . Because fees can devastate at a rate close to compounded interest ! It seems that the banks have intentionally taken advantage of human nature when dealing with the apparatus that allows you access to a society based on materialism . The Banks are there to facilitate Materialism and capitalism, but are taking advantage now in a very obvious way .

    The situation in the banking system seems very predatory in 2021.

  4. Edward HC Graydon Edward HC Graydon June 11, 2021

    I think at this time in Canadian history big changes could take place for many Canadians if the Canadian government under Justine Trudeau where to register CERB payments that where paid back in full and actually presenting an accurate public record of those who paid back CERB .

    The Canadian Goverment should publicly detail the date of receipt by adding this information into credit bureaus for those that might have paid in full.

    CERB was issued on a “trust basis” it was open to every Canadian who believed he or she was entitled or in need ..Basically it was at first convoluted and ideologically driven but it was available for all Canadians. Some of the amounts that where extended where quite high at first close to $14,000 dollars it is for this reason Justine Trudeau should instruct his finance minister to immediately make public those that received regardless of how? Who paid .And this would be done by reporting the time it took to pay back once received?

    I really think because the CERB checks where basically a verbal promissory note they should appear as paid back in full with the Credit Bureaus such as Equifax . I think they should report for a few different reasons and one intails the idea or premise of a China and their social credit system. It would be a good political move to add those that would like it to appear. As it is a reference to their good character!

    It is difficult for many to apply the discipline that was needed to send it back …But many did and the amount borrowed should reflect as a line of credit that was paid in full? As it is my opinion those that paid who where in fact not billionaires but many of Canada’s hard hit during covid 19 lock downs deserve to be recognised for paying revenue Canada back and it should reflect the real credit worthiness by showing to all creditors in a Equifax consumer discloser . This small but hugely important move could very well stimulate spending and the economy of Canada.

    Truly

    Edward HC Graydon
    Graydon Investments Group LTD

    PS ! Although I am Canadian I believe the general idea could be applied the American stimulus plan as well as both are in need of a financial injection of sorts based on credit

  5. Edward H C Graydon Edward H C Graydon December 3, 2020

    To the editorial board of this site and those that govern control ,your ability to retain communication from those that decide to voice their person opinions and participate on your site from 2009 is without question outstanding! At this time in history when many people find themselves censured for there thoughts and opinions you have allowed comments from myself to stay visible for over 11years … This is import for society and I think your site is setting a standard regardless of intent ,or done with or without altruism, it does not matter because it is a positive attribute to have for a reputable site.

    I feel the need to express my admiration for your handling of past communication.Your holding and retention of past communication is what is needed not only in America but around the world…Many around the world argued Google should implement the Right to be Forgotten Law more often for past comments made to the internet,I would argue differently ! I believe the biggest thing that can be done for freedom of speech is to pass a law promoting the Right to be Remembered but first Google needs to find it and that is not easy if it has been deleted! Google needs to produce all past comments deleted or not before real freedom of speech is to take place. But by retaining it longer it helps Google find it.

  6. Edward H.C Graydon Edward H.C Graydon January 28, 2010

    I really enjoy this publication ,and think that it caters to a more articulate crowd; this aside in my last post I mentioned a article that was written in Bussiness week; I believe that it was headlined as “Till death do us part”I really do believe that the article taught me something that I did not know, as far as third party collections on discharged debt,again I think all readers can learn from that issue of bussiness week. I will also go on record as to the fact;that I believe that should this practise continue into the future with no goverment intervention ;then it will be the down fall of the middle class in this country,with all the talk by Obama,and his talk of implementing change to the banking act,how is it that people are not being able to recieve the new debt free beginning ,that has been ordered by a bankrupsy judge?I liked Obama ,and I to was impressed with his outlook for change {and his speeches where great} but to me they remain speeches. I am not sure, if there are laws that stipulate that a federal act of bankrupsy may in some cases ;not be allowed collected in some states, but if this is the case ,then semantics and politics rule the working man ,that comes into hard financial times.Because Bankrupsy has been abused by all sides in the past ,maybe this form of indifference to the law is the result. All I know for sure is, that I would not have my name connected to these actions,from either side, as to me it is a form of intended fraud. It can be avoided by reduceing your spending outlay, and always being prepared for the worse case scenario.

  7. Edward H.C Graydon Edward H.C Graydon January 28, 2010

    I would like to bring to readers attention a article that was published in the Bussiness Week Magazine; that I believe lends issues ,of banking and moral issues that are know plagueing the Country. In the latest issue of Bussiness Week, it talks of the problems of discharged debt, being overlooked by thrid party collection agencys. I found that it was relevent to the article by The Independent; I believe that if a legally binding discharge; by a judge is being ignored ,then how can a person absolve debt? they can not and the collection will continue. I am absolutely opposed to a judges order being ignored, and am shocked by the fact that a thrid party collection house has the gull to ignore it. I am curious as to how the federal court allows this behavior to continue ,as bankrupsy is a federal act.

    Edward H.C Graydon

  8. Brent McMillan Brent McMillan October 14, 2009

    Hi Richard:

    I use a debit card to rent a car. (I regularly use Budget Car Rental which accepts debit cards.) They are becoming more and more accepted. Some companies, like Ikea, won’t even accept credit cards anymore. They only accept debit cards.

  9. Edward H.C Graydon Edward H.C Graydon October 7, 2009

    I believe that Brents statement ;should have stated “avoid secured credit”and try and get :unsecured credit as it is harder for the banks to collect on. I mean the banks are going to sue you if you do not pay; but unsecured is harder to collect on.I think that the best possible way to “consume” is to pay cash ;or always buy on sale.I do not think that credit cards are the beginning of the problem ;it is the end user that is the issue;spend less and work harder.

    Remember?The number one issue! If you have assets and you do not pay ; the banks will sell them to collect on there debt. Do not go homeless.

  10. Other Mr. T. Other Mr. T. October 7, 2009

    Mr. Winger, 2 words: “Charge Card”. I realize most people can’t tell the difference between credit cards and charge cards. My neighborhood (small, privately owned) car rental place takes my paper checks as payments, since I’ve rented there repeatedly – they charge my charge card the deposit and recredit it upon the car’s return. When you do repeated business with small neighborhood businesses, you can pretty much call your own payment terms.

  11. Richard Winger Richard Winger October 6, 2009

    Brent, how do you rent a car if you have no credit cards?

  12. Brent McMillan Brent McMillan October 6, 2009

    Avoid unsecured debt like the plague. It is one of the ways that people are being slowly but surely enslaved. I cut up and canceled all of my credit cards in 1998. They are a racket.

    Between 2002 and 2008 the rate of saving for U.S. Households was “0”. One positive side of the recent financial crisis is that individuals and households are starting to save again.

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