Wrangle Control from Credit Card Companies and Banks

In The New Confessions of an Economic Hit Man, I write that today we have a failed global economy, a Death Economy that is based on debt, fear and the destruction of resources. In this blog I address the first of those: debt. I want to focus not on the type of debts I persuaded the leaders of countries to accept when I was an Economic Hit Man (EHM), but rather on the debt that all too many of us have accepted as part of our lives.Personal debt in the form of home mortgages, student loans and credit cards has become the norm for most Americans and increasing numbers of people in other countries. These modern business transactions are just what the powerful credit companies want. Such practices increase the power they exert over people, as well as enriching their already-rich executives and stockholders.The average American's debt is more than $8,000. When it comes to credit cards, 39% of Americans have an outstanding balance, while 35% max out one or more credit cards during the holidays, according to a recent Savings.com survey. This comes at a steep price: The average credit card interest rate at the end of February was 15.89%.Credit card companies and banks control billions of dollars. And most of the power rests with a handful of companies. According to the payment systems research firm, the Nilson Report, $4.765 trillion in credit card payments were made last year. Visa holds the most market share at 22.1%, with MasterCard, Discover, CapitalOne, Chase and Citi following close behind—all with market shares in the teens.And you might be surprised to learn that the world's largest, most powerful public companies by revenues, profits, assets and market value are not based in the U.S. The top 4 spots on the Forbes Global 2000's list for 2015 go to Chinese banks. Warren Buffet's conglomerate Berkshire Hathaway sits in the fifth spot; it was the largest U.S. public company in 2015, with JPMorganChase taking sixth place globally.Credit card companies employ many insidious methods to control you and your money. Although the Credit Card Act of 2009 set a cap on late fee penalties, banks find a way around the law by citing inflation, shorter pay cycles, or by showing a cost analysis that appears to justify a higher fee. There's also no federal limit on the interest rate a credit card company can charge; consequently, companies often operate from a subsidiary in a state with no rate caps (e.g. Citibank in South Dakota).These ultra-rich companies also contribute heavily to election campaigns. In a 2004 interview with Bill Moyer, Senator Elizabeth Warren of Massachusetts revealed “A lot of people don't realize that the industry that gave the most money to Washington over the past few years was not the oil industry, not pharmaceuticals, it was consumer credit products. Those are credit card companies that have been giving money, and they have influence.”People live in servitude to debt. I often hear from students about to graduate from college or MBA programs that they had entered school with lofty ideals, such as starting companies to clean up pollution or do other admirable things that would contribute to a new type of economy—a Life Economy instead of a Death Economy. However, in the process they end up owing lots of money in student loans and discover that they have to accept jobs with Big Business. Once that happens, they begin a cycle of debt. Next thing they know, they fall in love, get married, have children and take on more and more debt.It is essential that we break this vicious cycle.If you have credit cards, control them—don't let them control you. The same with education, health care and other forms of debt. The less debt you accept, the better. If you must take on a mortgage when you buy a home, be very careful not be deceived into agreeing to one that will throw you into that never-ending cycle.In The New Confessions of an Economic Hit Man (LINK) I talk about how my great uncle Ernest, president of a bank in Waterbury, Vermont, in the 1950s, viewed his job. Uncle Ernest would drive us around town and proudly point out the homes and businesses his bank supported through loans. He told me that he viewed everyone who accepted a loan from his bank as a partner.For my uncle, it wasn’t just a matter of not wanting to foreclose. He believed that being a driving force behind the local economy was his job, his duty. It was also his joy in life. My uncle and modern bankers represent two very different value systems. In Uncle Ernest’s view, debt was a means to an end, a partnership between creditor and debtor. For the modern banker, debt paves the road to windfall profits. It delivers people into the EHM system and makes us accomplices in the Death Economy.The 2015 movie The Big Short, winner of an Oscar for Adapted Screenplay Writing and nominated for Best Picture, highlights that change in value systems. Modern-day cons and scams are part of business-as-usual in this EHM system, and when banks commit crimes, their officers manage to avoid being indicted.We're raised with the cultural mindset that we always have to have the fanciest home with the highest quality furnishings. But downsizing can be one huge way to take on less debt and lower our environmental impact. I recently moved from a fairly large house to a small, 2-bedroom condominium. At first when I had guests, a little voice nagged that I ought to feel embarrassed by the size of my home, but instead I’ve learned to take pride in the fact that I'm walking my talk and doing my bit to reduce my carbon footprint, land use and the amount of “stuff” I own!Because I sold my other house and had equity built up, I was able to get my condominium with no debt. It's freeing to not be beholden to the credit racket. And my condo reflects the philosophy that I write about.The Death Economy is based on debt, fear, and the destruction of resources. All of us can take a big step toward a more sane Life Economy by saying “no” to debt. Working toward our financial independence in big and small ways gives us peace and freedom from the credit system and its enormous influence.