posted on Oct, 27 2009 @ 04:39 PM
There is something extremely disingenuous about the stories that people are spreading online concerning credit cards and banks. It is approaching the
unreal. Is it that some people are paid agents of the big banks, coming online to post stories that will influence other people's behavior?
I'll make up a name and use it for my example. Let's call the made up person ''Rodney''.
So this guy Rodney has $20,000 cash in the bank and he also has some strange desire to charge things on a credit card instead of paying cash. Rodney
charges and charges until his credit card is maxed out at $20,000. The credit card bank is happy getting Rodney's $300 per month payment, and Rodney
is happy keeping cash. Rodney loves cash. He keeps it in a bank account for safe keeping, but he really loves the idea of having cash. Rodney could
keep all $20,000 at home held in the form of 200 $100 bills, but he doesn't feel safe with all that cash at home so he leaves it in his bank account
where it earns 0.20% interest. The interest rate is paltry, but Rodney feels good about having an account with $20,000 cash that he can tap into at
any moment. It just feels right to Rodney. It is safe in Rodney's mind.
Now the credit card company is charging Rodney 5% interest on his outstanding balance. Rodney's local bank is paying him 0.20% interest on his cash
savings. Rodney is comfortable with this arrangement because although he is constantly losing money on interest payments to the credit card bank, and
only receiving a pitiful token of interest on his cash balance at his local bank, he is delighted by the fact that he has $20,000 cash that he can put
his hands on at any moment.
Years go by. Rodney keeps paying to hold cash. For years and years Rodney pays to hold cash. Then out of the blue one day the credit card bank sends
Rodney a letter informing him that they are closing his credit account and they want money right away to cover his outstanding balance. This is a loan
call. The credit card bank is essentially tellling Rodney that they believe he can pay it now, without the necessity of long drawn out monthly
installments. This is, in fact, the opposite of what banks do. Banks want to maintain immense hoards of long drawn out monthly payment arrangements at
interest. That is what they do. Banks love to accept cash deposits at 0.20% interest liability, and then loan the money out at 5.0% interest to people
who.... here it comes.... people who either DO NOT HAVE lump sums of cash and need a payment plan that accommodates their immediate purchase desires
or necessities in terms of their low monthly or weekly salary, OR.... people who simply are extremely desirous of holding pools of cash. Which is it?
Which one of these choices fits Rodney's situation?
Rodney doesn't have a financial crisis or a need to purchase immediately and then pay later in monthly installments. Rodney doesn't lack resources.
In fact, Rodney is simply satisfying his strange desire to hold cash, and at a very low rate of return. In fact, Rodney is PAYING to hold cash, and on
top of that he is not even really physically holding the cash because he opts instead to keep it in the local deposit bank. It doesn't add up, folks.
When you follow the money you find it just does not add up.
The story invariably continues with Rodney blowing up and telling the credit card bank where to stick it. Rodney invariably gets online and claims
that he told them what to do with their lousy rotten banking operation. Why the nerve of those PROFESSIONAL bankers! How dare they charge me, and make
money off interest, when I use their service to offset payment across time. I mean, I, Rodney, just want to hold some filthy cash in my hands! Who do
they think they are?!! Why I'll show them. I'll just do an online bill payment immediately and send them one giant payment that will wipe out my
balance for good!