Credit Card Debt Management

Going to the Olympics? You better be prepared, because most of Beijing won’t take American Express. Or Visa, or MasterCard or Discover, for that matter. It’s a cash city, one of the few major international business hubs where that is still the case.

In preparation for the Olympics on Aug. 8, the Chinese government supposedly made a push for more businesses in the country to accept credit cards. However, as the International Herald Tribune points out, that means Chinese credit cards only — at least that’s the case with about 55,000 businesses. Another 55,000 businesses apparently accept credit cards from around the world, but 55,000 is a drop in the bucket of Beijing commerce. According to reports, the vast majority of food, souvenirs, clothing, and even lodging may be obtained with cash and cash only — and plenty of it. The largest bill in China is equal to roughly $14 USD.

Another recent news story said journalists covering the Olympics are complaining about restrictions on web access — no sites that speak ill of the Chinese government in any way. Unrestricted web access for journalists was supposedly another issue being addressed by the Chinese government in preparation for this year’s Olympics. Interesting.

At any rate, first-time visitors to China are learning the fine art of foreign currency exchange, bank teller lines and ATM withdrawals. There are, however, a host of problems with that, including unreliable machines, daily withdrawal limits, limited ATM cash supply, and really long waiting lines. Toto, I don’t think we’re in Kansas anymore.

Ah, the good old days of the 1980’s. There’s not a ton to miss about that decade, and it was certainly not impervious to its fair share of financial trauma (skyrocketing mortgage interest rates and a bona fide Wall Street crash, for starters). However, when I watch the Cosby Show, I grow nostalgic in a major way.

In a rerun that aired today, the family has a good laugh at son Theo’s plans to move out when he is 18 and become a self-supporting model. He already owes money to everyone in the family — even a quarter to Rudy! His promises to repay them are greeted with great skepticism. Furthermore, advances on his weekly allowance are already “backed up until his 50th birthday,” as his dad puts it. Bill has to have a heart-to-heart with his son that goes something like this:

“Son, this is your family, and we may not mind loaning you money, even though you’re not qualified to repay, but when you get in the real world, it’s not going to be like that.”

When is the last time you had that kind of talk with your kid? There are some simple things you can do to instill financial common sense into your child. For starters, don’t be afraid to talk about money around your kids. It’s a fine line — you don’t want to scare them, but you also don’t want them to take everything for granted. If they want a luxury item that you can’t afford, ask if they have money to buy it. They just might, if they’ve diligently saved the weekly allowance you might give them once they’re of age. If they’re still tots, they can collect money they find lying around and keep it in a clear container where they can watch it accumulate. Take them shopping at yardsales or thrift stores and let them buy one thing with their money, to instill a pride of ownership and a work ethic.

Also, loan them money when they’re older, but consider tagging on interest and late payment fees. Some parents even start taking taxes out of the weekly allowance. Talk about a dose of reality! At any rate, today’s message from the Cosby clan was a sobering dose of reality that kids just can’t find on the television anymore.

It was an era when TV was done right, full of important social messages without sacrificing entertainment value. It may have been the principles of Bill Cosby himself shining through, but I like to think it was a theme running throughout 80’s TV programming. There just didn’t seem to be as many shows on the air back then focusing on people getting stuff and kids demanding stuff and neighbors getting jealous over each others’ stuff. What is up with that?

The obsessive, status-driven consumer culture slyly crept in during the 1990’s, sort of before we even realized it. Unfortunately, it’s slow to disappear and is directly responsible for a lot of the problems this country is facing now. So please, for the sake of the children, set the right examples of fiscal responsibility, don’t make finances a taboo discussion topic, and turn on some old Cosby Show reruns for good measure.

The credit card is a thing of prestige in some circles. Take, for instance, the recent American Express commercial poking fun at the businessman’s comic book character-themed credit card in lieu of the prestigious AmEx Gold card. In fact, in the commercial it causes the poor, dim-witted businessman to lose out on an apparently lucrative business deal.

Yes, credit card colors and styles draw respect in some circles. Another point of pride, albeit one much less talked about, is the credit limit. Credit card companies can raise your credit limit at will, just as they do with your interest rate. Card issuers increases generally consider credit limit increases two or three times a year. When the bank sees you handling your repayment plan responsibly (i.e. no late payments or over-the-limit charges), they will likely offer you an increased credit limit. If you get an offer for an increase in your limit, you do have the option to decline it, unlike an interest rate increase (too bad we can’t decline those)! You may want to decline it if you are having trouble paying off the balance you already have, but we’ll get to that.

A credit limit increase is often viewed as a good thing by the cardholder. All too often, it’s also viewed as a signal to spend more, spend more. There are two problems with this. It gets the consumer mired deeper and deeper in debt. It’s a psychological issue, and a huge temptation for cardholders who haven’t learned how to get their spending under control. Just because you have room on the card doesn’t mean you can afford the payment. If you can’t afford it now with cash, you won’t be able to afford it a month from now. It may sound like your grandmother talking, but she knew what she was talking about.

Furthermore, credit card companies can decrease spending limits just as fast as they increase. This can have consumers over a barrel with interest charges and over-the-limit fees. It can ding their credit report in a major way and cause their interest rate to skyrocket. It ain’t pretty, and don’t think it won’t happen to you. Bottom line, is a credit limit a good thing? It’s all relative. But if you have a history of credit troubles, it’s best to decline the offer. It may be handy in an emergency, but the chances are good that you would have already nearly maxed out your available funds and they wouldn’t even be available anyway.