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moneysense.ca, 27/01/10
The Card Game on PBS
PBS aired a Frontline documentary called The Card Game tonight. The documentary, originally broadcast last Fall, provides a revealing glimpse into the practices employed by the credit card and banking industry to snare customers into a web of fees and sky-high interest charges. Funnily, it seemed to me that the pay day loan operation featured in the story appeared to be the least sleaziest of the lot. It also occurred to me that whatever regulations are put in, the industry would find ways to operate around it and the best way to keep these wolves from the door is to use credit responsibly.
moneysense.ca, 27/01/10
The New York Times has been running a series of articles, videos, and podcasts on this topic in conjunction with the PBS program, available here:
http://topics.nytimes.com/topics/news/business/series/card_game/index.html?hp
Great show. Thanks for the link. Let me ask a question…What is the most ethical, honest bank in Canada and why?
I thought about this for a bit. Maybe the problem is that for decades and decades, people have put bankers on an unwarranted ethical pedestal. Don’t get me wrong, I’m not saying that they are criminals or loan sharks, BUT their main goal is to drive profits. How is this any different from a car salesman? But for some reason, bankers have generally ranked among the more respected professions. Of course, this is now changing but it is interesting to try and understand why they have been viewed in such a positive light for so long. Is it the suit or is it that our psyche requires us to place that level of trust and respect in the person or institution that we are giving so much of our personal information and money to?
Thoughts?
@Scott: In the past, banks were viewed (and with good reason) as a safe place to put your money and let it grow. Today, a bank is generally a place where you put your money and watch it shrink. Monthly fees far overwhelm the few pennies or dollars you can expect to earn in interest. I think this shift, as well as recent exposés of mismanagement and scandal at some banks, have soured many people on banks in general. Even credit unions, long viewed as having the customer’s best interest at heart, are turning out to be just as mercenary as mainstream banks.
The most honest bank would be the one that admitted that they were NOT on the customers side, nor should they be. The bank should be on the shareholder’s side.
Despite Canadian’s widespread belief in a benevolent government, and the regulator’s implied assertion, the regulators are not on the consumers side either. Their focus is to make sure that they have a bigger and bigger role in the matter to maximize what they make, and the security of the job. In every crisis, nobody questions the regulators – they just agree to regulators assertion that more regulation is needed.
I am sure this will sound heartless, but maybe if more people were homeless and begging in the streets because of their overuse of debt – that would trigger people to getting back to a healthy fear of debt the way they used to. Maybe then they would be smarter about what obligations they take on.
PS (In my experience, all of the big five banks are exactly the same -maybe you get a good banker sometimes that treats you well, but the banks are the same.)
My experience with all of the big banks is that TD tends to be the least evil followed by Scotia, but that’s sort of like comparing demons to fallen angels.
Also, since there are thousands of branches and tens of thousands of employees, everybody is going to get different experiences. The banks are actually remarkably decentralized and each branch has a lot of leeway.
If you have a large brokerage account and/or have a mortgage with a bank, you can usually negotiate away most of the fees (don’t forget about this next time you renew your mortgage or if you have over $50K in your brokerage). Threaten to leave if they don’t. Go to other banks and say you’ll switch your brokerage and mortgage if they cut the fees. Ask what else they can do as they may give you a high end credit card w/o the fee as well. Show statements. Play them against each other. You may even end up with an iPod or netbook or something.
@brad: Thanks for the link to the NY Times page. It’s going to keep me occupied for hours
@Scott: I think all Canadian banks are the same. They all operate with a profit motive and are masters in sneaking in fees even for regular banking products, let alone credit products.
@Rob: Agree. Actually, the credit card and banking industry insiders in that story are remarkably upfront about the way they conduct business. What I’d personally like to see is a one-page disclosure pointing out how much a credit card could end up costing in fees and interest charges under various usage patterns. Today, this information is buried somewhere in the 10-page fine print. If customers still sign up and carry a balance, then, yes they have little reason to complain.
@Christopher: I’ve had good experience with all the banks I’ve dealt with. Then again, it is nice to be in a position to dictate terms under which we’ll do the banking. Not everyone is in that situation.
Prof. Warren was on The Daily Show last night. Very articulate on the subject:
http://watch.thecomedynetwork.ca/#clip259281
http://watch.thecomedynetwork.ca/#clip259283
‘Going after the Banks’
Wow, this is great — thanks for the post.
That’s not the least of it, in response to the new rules in the US, credit card companies are employing a whole new set of tricks to ensure continued debt slavery.
http://www.businessweek.com/magazine/content/09_52/b4161095199108.htm
Is one article on the subject, there was another which had a few more but I can’t remember the link.
I find it interesting that those with the least amount of money are the ones who end up paying the most for things (using this kind of credit means they end up paying double or more the original price).
CC: I’m afraid that a one page disclosure wouldn’t be any different from 10 pages. The reason being that 1 page is simply beyond the attention span of the average consumer. Those consumers that would take the time to read a 1 page disclosure are probably the same ones that already understand the credit card game, and aren’t getting suckered in now.
Instead I have a proposal:
All credit card applications and bills could include a half-page warning on the risks of credit card use. Something like the half-box warnings that are required on all cigarette packages. Instead of pictures showing lung cancer and impotence, the credit card bills could show pictures of foreclosed homes, families fighting and people searching dumpsters for discarded beer bottles.
I see a lot of transfer of responsibility in this video. I’m not saying the practices aren’t evil, but the customers did willingly overextend themselves.
Thanks… especially to Brad for those links that parallel this documentary. But yes, at the end of the day… everyone looks for loopholes!
[...] the PBS Front line special The Card Game, the entire Credit Card business is a shrine to Chutzpah. The Canadian Capitalist has a link to the special, well worth watching, but unmitigated temerity and complete contempt for [...]
Thanks for posting this.
I received an offer for a credit card recently and looked it over. No annual fee, a decent points program, and a few other perks. Then I saw the 21 day float. Unless their billing cycle is also 21 days (which I doubt), then I’m bound to get hit with interest charges. That sucker went into the recycling bin. I’m quite ready to go without a credit card if the games get too stupid.
I agree Melaine….
Fundamentally, credit card businesses are in business to make money. Certainly business practices should be ethical (emphasis on “should be”) but in the end, credit card companies exist because they know consumers overextend themselves and will continue to do so, and apparently, people don’t mind paying to overextend themselves.
Ultimately, consumers have few people to blame other than themselves when they’ve spent far more money than they have. I’m not saying there is not “good types of credit”, I am writing about overextension and going beyond any debt repayment threshold.
I’m on the same page as Al (different Al) above. I could live without a credit card if I had to, and most people should be able to do the same if the ultimatum presented itself.
Thanks for the great post and link to the PBS show CC! Really makes you stop and think!
Does anyone else get that the message is: invest in bank stocks cause they’re freaking geniuses?
[...] here: The Card Game on PBS | Canadian Capitalist Share and [...]
Saw the Frontline program and was disappointed that it was so biased in favor of the “victims”. There are the necessities of life, oxygen, water, food, shelter, community, but nowhere on anyone’s list is a credit card and the accompanying desire to have what one cannot afford right now, not later. Now! An intelligent, attractive, employed young woman of about thirty is apparently a “victim” because her account was running on empty, an expected deposit didn’t materialise and she didn’t bother checking to find this out, and she was hit with overdraft charges. Grow up, learn from one’s mistakes, and move on. Happily I learned long ago to pay off my total balance every month. With a no-fee card they make no money from me.
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[...] PBS special about credit card companies and their underhanded tactics. Check it out. (Hat tip to Canadian Capitalist for that [...]