The Truth About Credit Cards

“The borrower is slave to the lender” – Proverbs 22.7

Look at these innocent pieces of plastic. What a useful, helpful tool they are. Yet behind these pieces of plastic are enormous corporations doing everything they possibly can to turn you into one of their debt slaves.

Credit card companies are psychopathic and completely free from morals or ethics (like most corporations), and if you’re not careful they will turn you from a free human being into a debt slave.

In our modern societies, faceless people who you’ve never met can ruin your life on a deeply personal level. Credit cards are just one such way that others can ruin your life from a distance.

In 2021, Americans carried $860 billion in credit card debt. In the same year, British people £72.1billon in credit card debt.

Perhaps you’ve been through the hell of credit card debt. Perhaps you’re going through that hell right this moment.

Perhaps you use your credit cards responsibly; paying your balance off every single month and believe you’re getting one up on the credit card companies.

These pieces of plastic have been in our societies for decades. Floating around, causing chaos and ruining lives. They’re a “normal” part of the modern world. And yet they’re rarely held under the microscope. I intend to do just that.

This is the truth about credit cards.

The Tricks Of Credit Card Companies

Credit card companies want you in debt. While they do make money from transaction fees every time you make a purchase using their card, their ultimate goal is to pull you into a hole of credit card debt. After all, this is where the majority of their profits come from.

They will do everything they possibly can (within the law) to try and turn you into one of their millions of debt slaves.

It’s a psychological battle: You Vs The credit card company. Your goal is to pay off your debt at the end of every month and claim the rewards. Their goal is to make you their debt slave.

Everybody who takes out a credit card thinks they’re going to pay it off every month. Yet 47% of Americans don’t. They open the credit card believing if they just pay it off every month, they can get free rewards. But then life happens, and people end up in debt. The car breaks down. A window gets smashed. They’re hit with a healthcare bill (if they’re American). And they suddenly find that they can’t pay off their credit card bill.

For those without savings, taking out a credit card is like dancing on the edge of a cliff. You can dance around and enjoy your rewards, but one wrong step, or even an unexpected gust of wind, can push you down the cliff and into a deep hole of credit card debt that may take you years to recover from.

We know this is the mindset of the credit card companies by looking at the language they use toward their customers. Those who pay off their credit card bill each month are known as “deadbeats” within the credit card industry, while those who fall into debt are called “revolvers”.

Now let’s look at some of the tricks credit card companies use to manipulate into being one of their debt slaves:

Changing Interest Rates

Interest rates on credit card debt (14-20%) are comparable to that of loan sharks. Not only that, but this interest compounds daily. Talk about a debt trap!

Credit card companies reserve the right to increase the interest rate at any time. Some credit cards will be marketed with a “0% interest rate” for the first 6 months. Yet after these 6 months, it could be boosted up to 18%. After 6 months, many customers (suckers) have developed a habit of not worrying about paying off the bill each month and often find it difficult to break this habit after the interest rate suddenly changes. This is why they offer a 0% interest rate in the first place; they’ve researched their customers extensively and know that this scheme will cause many to fall into debt. Credit card companies study your behaviour more than you study your own behaviour.

Targeting Vulnerable People

In fact, credit card companies specifically target people who are most likely to fall into debt. They target poor people. They target students on college campuses (in America). They even target people who have previously had credit card debt.

“In running up credit card debt, it can be argued, college students are learning to live a lie. They are living at a level that they cannot afford at the time or perhaps even in the future. They may establish a pattern of consistently living beyond their means. However, they are merely postponing the day when they have to pay their debts.” – Expressing America – A Critique of the Global Credit Card Society – George F. Ritzer

Spending Thresholds

Some credit cards have spending thresholds you need to pass before you receive any rewards, encouraging you to spend more than you normally would in order to pass the threshold. (For example, you may only be able to collect your airmiles after you’ve spent over $10,000 on the card).

Changing Their Accent

Credit card companies experiment on their customers constantly. When you call some credit card companies, they will track your area code and make sure you speak to someone with the same accent as you to make it more likely that you’ll trust them. That’s the extent to which they know your behaviour.

Changing Credit Limit

Anyone who signs up for a credit card is given a specific credit limit. However, these limits can be lowered at any time, and they don’t need to even inform you about it. For example, you might have a credit card with a $1500 credit limit; and you might have spent $1200 of this limit so far this month. Without warning, the credit limit can be lowered to $1000, putting you above the limit; meaning you’re immediately required to start making interest payments. If this sounds unfair, if it sounds criminal, if it sounds manipulative: that’s because it is.

Creating New Fees

Credit card companies like to come up with all kinds of new fees to hit you with when you take out a card. Annual fees. Late payment fees. Balance transfer fees. Foreign transaction fees. Even inactivity fees (yes, you can be charged a fee for not spending money). Bare in mind, that these fees do not need to exist; they were simply dreamt up by the credit card companies in order to take more of your money.

Now, some of you use a credit card and have never missed a payment. Right now, you’re sitting there smugly, feeling as though you’ve beat the credit card companies at their own game. Well, you guys may still be getting manipulated into spending more, as I shall now explain.

The Psychology Of Credit Cards

The argument goes like this: I pay my credit card off every month. I don’t get into debt. I use my credit card to pay for things I would have bought anyway. I get cashback and airmiles. What’s the problem? I would be a sucker not to use a credit card.

The problem with this argument is that countless studies show that people spend more when using a credit card than when using a debit card.

When you use a debit card you feel the psychological pain of loss; the money comes directly out of your own bank account, with no delay. Debit cards and cash have a strong sense of reality attached to them, while credit cards do not.

When you use a credit card, a number of factors are reducing this psychological pain:

1. Delayed Loss: No money will leave your bank account until the end of the month. Despite the fact that you’re fully aware that you’ll have to pay in the future, the fact that the psychological pain doesn’t hit at the moment of payment means that you feel more positive about spending money than you otherwise would be.

2. Rewards: As you may know, when you spend money on a credit card, you’re rewarded. Common rewards are cashback and airmiles. The fact that you’re rewarded for spending money means that, instead of feeling the pain of buying something, you feel positive about your purchase as dopamine reward chemicals fill your brain. What’s the point of 3% cashback on your credit card if you end up spending 10% more while using it?

3. Pool Of Resources: The bigger the “pool of resources” you’re taking the money from, the more you’ll likely spend. If you pay for a $4 latte with the $5 note in your pocket, you’ll likely feel far more psychological pain than if you take your money from the $5000 in your bank using a debit card. And what’s the “pool of resources” of a credit card? Psychologically speaking, it’s this: ∞. Infinity. When you feel as though your pool of resources is enormous, you’re likely to spend more.

It’s simple: Less psychological pain = More spending.

You think you spend exactly the same with a credit card as you with a debit card? Maybe you do (although statistically, you don’t). Or maybe you’re underestimating how much of your day-to-day behaviour is subconscious.

Just as most people believe that advertising doesn’t affect them, people don’t believe and don’t want to admit that credit card companies are able to influence their spending. People hold a sense of pride in feeling like an intelligent, responsible consumer in control of their own finances and it’s painful for them to admit when they’re being manipulated.

Your brain works like this: thoughts go from your subconscious brain first, before moving through to your conscious brain. For instance, let’s say you decide to buy a dessert at a restaurant. Your conscious brain tells you a story: The dessert is only $8. It’s normal for people to get dessert after a meal. I deserve it. Sometimes in life you need to enjoy yourself. These are the rationalisations that your conscious brain comes up with. But underneath these rationalisations is your subconscious thought.

Your subconscious brain knows that you’ll be rewarded with more points on your credit card the more money you spend, and therefore feeds your conscious brain rationalisations for why you should buy the $8 dessert ($8 that could have gone into your savings account).

Now take this one event, and repeat this situation every single day of your life. $8 dessert. $4 latte. $30 round of drinks at the bar. $20 taxi. Can you understand how the subconscious effects of paying with a credit card can affect you over a long period of time?

If you had instead been paying for each of these items with a debit card, would you have changed your mind about some of them? If the subconscious brain knew it was going to experience some psychological pain with each of these purchases, it may have fed your conscious brain a different set of thoughts about that $8 dessert: I really don’t need this dessert. $8 is too much just for a little dessert. Wouldn’t it be better to have that $8 in my savings account instead? If I want to save up to buy a house, I can’t spend money on things like this.

This is how your payment method affects what you spend money on and what you don’t.

Credit Card Debt Is Personal

Credit card debt isn’t about numbers in a bank account or names on a spreadsheet. It’s about the destruction of the lives of real people. Credit card debt causes: suicide, depression, anxiety, ruined relationships, ruined families, divorce and countless other knock-on effects.

It’s easy to blame those who end up with credit card debt as stupid, careless or irresponsible. But it’s important to remember that it’s often other personal problems that lead to credit card debt in the first place.

Stacy struggles with depression. She finds that she gets a temporary feeling of happiness when she shops. She then takes out credit cards to shop more and ward off her depression and ends up in mountains of credit card debt.

David recently lost his father to cancer and is going through a tough divorce. In his low mental state, he gets addicted to gambling. After losing all of his savings at the casino, he takes out a credit card to try and win them back, ending up deep in debt to credit card companies.

Credit card companies are perfectly happy to exploit people in the lowest moments and turn them into debt slaves.

Modern society is filled with trapdoors that take people at their lowest moments and drops them into an even greater hell.

Credit Cards As Status Symbols

The evolution of status symbols is related to their public perception. If enough outsiders adopt a trend, action, or brand, they can change the meaning of its signal. In modern cultures, status symbols tend to be things like: Yachts, sports cars and watches. Yet in particular African tribes, it could be a pair of earrings or a necklace.

For human beings around the world, status symbols are universal. And one such symbol is the credit card.

Credit cards are usually split into tiers as follows: Platinum, gold, silver and bronze. The platinum card, of course, is the card that carries the highest social status for the owner.

Some cards are made of metal rather than plastic, and purposefully heavier in order to convey a sense of status to anybody who holds them (a card with more weight suggests an account with more money on it).

Credit cards like the American Express Centurion have genuine exclusivity as they require a certain threshold of wealth to obtain. Yet other credit cards only carry the illusion of status. The apparently high tier “Gold” and “Platinum” cards are only high tier because they the allow owner to carry a higher balance on them than the lower-tier cards. They’re no symbol of any real wealth.

Like all status symbols, luxury credit cards only convey high status in the eyes of those who believe they carry high status. Ask yourself: What’s so impressive about someone carrying around a piece of plastic of a particular colour? Does this really mean anything?

Now, many of you will use a credit card, not end up in debt and spend exactly the same amount as you would with a debit card. Bravo. You are in the minority. For now, at least. Enjoy your airmiles, free holidays and 3% cashback.

Credit cards are dangerous and psychologically manipulative. Use them at your own risk.

“Debt can turn a free, happy person into a bitter human being.” – Michael Mihalik