The Cruelest Social Experiment in the History of Money

All they want to do is separate you from your money

All they want to do is separate you from your money.

While some people and companies have good intentions, the credit card companies don’t. No matter how they position themselves or the marketing gimmicks they come up with, they exist for one purpose. To take your money and charge you interest on it.

Some personal finance writers recommend freezing your credit cards in a block of ice. I suggest getting rid of the debt and your credit cards altogether. Forget they exist. Never use them again. If you can’t afford it, don’t buy it.

I have been in trouble with credit card debt more times than I care to recall. This experience taught me several things, most of which classifies as standard money management advice. But the biggest thing I learned is that there’s no rationale whatsoever for having a credit card. Most people kick and scream at the thought because banks — and their often unwitting accomplices — have socialized that credit cards provide not only utility but benefits. For a massive portion of the population, nothing could be further from the truth.

Even with credit card debt down sharply due to the pandemic, Americans still carry a collective balance of $852 billion, according to the New York Fed. The average American has four credit cards.

Learn About Credit Early. By Not Getting Your First Credit Card.

Mine was from Buffalo’s M&T Bank. I was a teenager. I don’t recall getting in the trouble with that one. I lived rent-free. With my parent’s support, I had no expenses. I probably paid that card off in full each month, if I even used it.

Then, when I was 19 going on 20, I moved — to Miami, Florida. I met a girl. We moved in together. We needed furniture. Neither of us had the cash to buy it so I got a credit card from the long-defunct Luria’s Department Store. We spent a couple of grand — actually we put a couple of grand on that credit card — to furnish our living room and bedroom.

There’s no need to plow through the next twenty years of credit card-related inanity. When I went out on my own, I kicked off a vicious cycle of living beyond my means. I chalked it up as the cost of doing life. Soon enough, I didn’t even think twice about it. I was in a no-ponder zone. It was life.

The social experiment began in 1950. That’s when Diners Club introduced the first modern-day credit card. Except it wasn’t a credit card as we know them today. It was a “charge” card. You could charge dinner — Diners Club targeted restaurants — but you had to pay your balance in full each month.

That’s how American Express did things when it introduced the first plastic cards in 1958. After Diners Club cardboard (yep, cardboard) and AMEX plastic came Bank of America’s California-only, “BankAmericard.” It worked:

Based on the success of BankAmericard in California, other banks used the same strategy of sending out cards to customers. It worked so well that by 1970 more than 100 million credit cards were in circulation across the country. That same year, all issuing banks formed National BankAmericard Incorporated, as an interbank card association for marketing in the U.S. To reflect its international acceptance, BankAmericard changed its name to Visa in 1976. The name was chosen because it was a term recognized throughout many countries and across many languages to mean universal acceptance.

From there, banks brainwashing of consumers intensified, as it does to this day. It doesn’t take a consumer finance scholar to see and understand this. Yet, so many of us continue to fall for it — hook, line, and sinker.

Don’t Let Credit Be a Way of Life

We should treat credit cards like smoking. If you’re smart, you won’t even start. Instead, credit cards have not only become part of everyday life, we consider them status symbols. Even me, a guy who literally doesn’t see the value in taking out a mortgage and refuses to use a credit card, falls for it.

When I worked in a bar prior to the pandemic, I took credit (and debit) cards from people all day and night long. Somebody hands you one of those heavy cards — made of titanium or whatever — and you take note. Dude must be a baller. I still remember the first time a guest pulled out one of the new Apple Cards from Goldman Sachs. I held it between my fingers and looked it over as if he had just presented the world’s latest and greatest invention. I tapped it on the bar top. It, also, was heavy. All white with a silver chip and the Apple logo.

But here’s what I remember more. Instances of countless bar guests effectively living beyond their means, which I illustrated in a recent Medium article:

At least once a shift, a guest would hand over their debit card and tell me they were unsure if it would go through. One of three things usually happened:

Decline. Guest scrambles to pull cash out of their pocket.

Approved. Guest breathes sigh of relief.

Declined. Guest makes quick transfer of funds in-app. Approved.

Too many guests divulged too much information — unsolicited — about their personal financial situations. Seemingly stable and gainfully employed individuals uncertain about how much money was in their checking account or, worse yet, running with barely a dime to their name. Yet, here they were crossing their fingers over an $8 charge for a pint of beer.

This raises the warranted question: How can you be okay spending $8 you don’t have or your last $8 on a pint of beer?

I used debit cards as an example there. For a reason. But the same thing happened day after day with credit. Declined. Followed by that puzzled look of “I can’t believe my card got declined” even though you know exactly why your card got declined, even if you fail to acknowledge you have a problem.

I let credit become a way of life. It got me in trouble. It stunted my wealth-building process. Freeing myself from what’s little more than a social cycle has been one of the most liberating experiences of my life. I carry one card. My debit card. Every purchase comes straight outta my bank account. From rent to a latte to parking meter fare (I have very few coins). No exceptions.

You Can Get By Without a Credit Card

The kicking and screaming often include the false (and convenient) notion that you need a credit card to rent a car or stay in a hotel room. Not so. As representative examples, here’s Marriott’s debit card policy:

a. Upon check-in, your card issuing bank will place a hold on your debit or credit card for room & tax charges, any applicable resort fees, plus $50.00 for incidentals per day for the entire stay.

b. This hold will not be released by the issuing bank for up to five (5) business days after your departure.

And the same from Hertz:

In most cases, the location will perform a credit check for debit card customers to determine credit worthiness at the time of rental. The customer must meet the minimum criteria to rent using a debit card. In addition, the acceptance of debit, prepaid or store value cards is contingent upon the card having available funds to cover the estimated charges plus an authorization of up to US$ 200.00 given conditions depending on location, length and date of rental that will be outlined at time of rental. These funds will not be available for your use.

That’s the long and short of it.

If you can’t cover the cost of the room, the rental, and the deposit hold, are you really in the position to rent a car or stay in a hotel room? It’s not all that different from getting declined on an $8 beer. You have bigger problems than needing a credit card because you can’t “get by” without one.

It’s at this illogical crossroads where we crush ourselves financially and prove the brilliance of the bank’s social experiment. I did this for years. We treat credit cards as a remedy to not having enough money (or living beyond our means). Credit cards will not aid you on the road to financial health. They’ll impede you. In function and by design, they go against almost every tenet of sane, logical, and sound personal finance.

But I Only Use It For the Points

No. You won’t “only use it for the points” or miles or whatever. And, even if you do, you’ll spend to get those points and spend even more when you use those points. It’s sick psychology. And damn good marketing.

It’s what keeps millions of people from getting ahead financially.

Kicking Credit Cards is Like Kicking Booze

It’s not easy. I stopped drinking during the pandemic.

I’m not an alcoholic. I haven’t craved booze once during the four or five months I’ve been without it.

Alcohol gave me one hell of social life. But it was illusory. I can’t have the kind of social life I had with endless flows of beer, wine, and whiskey without them. It’s that simple. I’ll have fun. Maybe more and better fun. But it will not be the same. I had a social life — a party life — on steroids. And it’s absolutely, positively 100% because I was buzzed, drunk, or high (I used a lot of edibles) a vast majority of the time at work (I worked in a bar).

When I abused credit, I lived an illusory lifestyle. I lived beyond my means. I fell for the social experiment that sucks otherwise intelligent individuals into believing spending more than you earn/save should hold sway as part of the American experience. As with drinking, I realized spending was going to get me in serious trouble. It already got me in trouble — as did drinking — but not a serious trouble.

I never got a DUI. I never got somebody pregnant because I was drunk. I never intoxicatedly said the wrong thing to the wrong person. But there’s a better than zero chance I was headed in that direction. I have seen it happen to more than a handful of people, including friends.

Overspending didn’t leave me without food. It didn’t end a relationship. It didn’t render me homeless. Maybe it never would have. But I’m done taking on too much lifestyle risk and lifestyle inflation — the, as Ben Le Fort calls it, insidious killer of wealth.

I’m finished playing chicken with my health, general well-being, social relationships, and, equally, my money.

This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.