USA SPECIAL... Credit Card Nation: Till debt do US apart

USA Credit Card Nation: Till debt do US apart

    By the time this appears in print, my friend Gary Larsen would have arrived in India on his second visit. Gary is unique among Americans I know in several aspects, most strikingly in the fact that he does not use credit cards. Part of Gary’s spare, thrifty lifestyle is to live on $400 — in cash — a month, which he says he typically manages to do. Not that he can’t afford more; a retired Boeing engineer, Gary is a man of considerable skills and means, and a comfortable nest egg.
    But it’s a part of his no-frills approach to life — that has all but faded in a world teeming with greed, desire, aspiration, self-indulgence etc — that he spurns extravaganzas. In fact, visiting India may be the most expensive undertaking Gary has ever signed up for. Born in Vashon Island in Washington State, Gary, now in his late 60s, had never ever left the Seattle area — even to visit other parts of US — till his visit to India couple of years back. More about the circumstances of his visit and his adventures in India another time.
    There are nearly 200 million credit card holders in the United States, according to data from the Census Bureau, which means more than 60 per cent of the population is "plastic-ky" or "pla-sticky". Then there are debit cards, prepaid cards, and other assorted synthetic instruments. The average American credit cardholder has 3.5 credit cards, with the number going up to six and more for those above the age of 60. Overall, the Bureau has determined that there are nearly 1.5 billion credit/debit cards in use in the US. A stack of all those cards would reach more than 70 miles into space.
    Evidently, it is not enough to envelop the planet, but we might get there soon enough once India and China join the party, particularly if you count assorted idharudhar-aadhaar kinds of plastic that will come into existence in due course.
    How did we come to this pass? The concept of using a card for purchases was ostensibly described in 1887 by Edward Bellamy in his utopian novel, ironically titled, Looking Backward. Bellamy, according to various chronicles, used the term credit card 11 times in this novel, although this referred to a card for spending a citizen's dividend rather than borrowing. But if we are always running after things in life, can debt be far behind?
    For much of the early 20th century, US companies issued business specific cards — gas stations selling fuel to automobile owners, airlines for air travel etc. In the late 1930s, companies began accepting each others’ cards. In 1950, the idea of customers paying different merchants by consolidating multiple cards into a single card was introduced by Ralph Schneider and Frank McNamara, founders of Diners Club. We haven’t looked back since.
    Today, Visa and MasterCard rule the roost, having dished out nearly a billion cards (credit, debit, prepaid) between them in the US alone. India is a huge untapped market. It has only about 18 million credit cards in circulation, the lowest penetration rate in Asia-Pacific. Some estimates put it as low as 5 million cards. Small wonder the top management of credit card companies has many Indians among them. The current president and chief executive officer of MasterCard worldwide is Ajaypal Singh Banga. His brother is the equally wellknown Manvinder Singh Banga, former chairman and CEO of the storied Hindustan Lever Ltd, and their father is a decorated general of the Indian Army, retired lieutenant-general Harbhajan Singh Banga.
    So are credit cards good or bad? Well, it depends on how you use them of course. On balance, particularly for those who travel and transact a lot, it is priceless. You avoid the inconvenience of having to carry around wads of cash, scrounging for change, and avoiding the hassles of counterfeiting that appears to be surging in the era of precision printing. The flip side, as we are discovering, is we are signing up for all kinds of obligations in small print, including having our travel and spending behaviour tracked all the time. As worrying as privacy intrusion is credit card scammers and fraudsters.
    How to prevent this? Well, we could go back to the Larsen principle of not using any plastic and living a spare life. Unfortunately, that’s a tough ask unless you opt for sackcloth and ashes. Today, credit cards are responsible for more than $2.5 trillion in transactions a year and are accepted at more than 24 million locations in more than 200 countries and territories, according to the American Bankers Association. In fact, some businesses, particularly airlines, do not accept cash payments. Till such time financial instruments are encoded onto our body — and that day isn't far off — plastic is inevitable. Even then scammers will always find loopholes to exploit.
    The best one can do is to minimise the number of cards you own and stay on top of every transaction, including checking your receipts and statements promptly and informing the card company if you travel overseas. Carry only the cards you need and use and discontinue those you don’t use. If you still fear getting ripped off, then stay with the Larsen principle. Ditch the card, especially if you lead a quiet, self-contained life. Millions of people across the world still belong to the pre-plastic era and they are fine.

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