Usury

For the last few years, I've worked with credit cards from different banks in either customer service or collections. I've heard all the stories. I've seen all the procedures. If you ask me, credit cards are the ultimate evil. This is because they have taken the greatest evil, usury, and made it even worse. Take into consideration this excerpt from Wikipedia:

Usury ([…] from the Medieval Latin usuria, "interest" or from the Latin usura "interest") originally meant the charging of interest on loans. This included charging a fee for the use of money, such as at a bureau de change. After interest became acceptable, usury came to mean the interest above the rate allowed by law. In common usage today, the word means the charging of unreasonable or relatively high rates of interest. The term is largely derived from Christian religious principles; Riba is the corresponding Arabic term and ribbit the Hebrew one.

Back in the day, charging interest (at any rate) was considered evil, but somehow the meaning of the word changed. Ah, the power of money! On first sight, charging interest seems like a great thing. People can buy things they can't afford by borrowing money, and then pay a little for the favor. Poor people get their instant gratification and the wealthy get more wealth. It's a win/win, right? No wonder it eventually became acceptable. Imagine if the meaning of "murder" eventually changed to something like "to kill more than 10 people within a week".

While I no longer consider myself a religious type, I still observe Christian values. Whether you believe Jesus is the son of God or just a really neat guy with great ideas, fabulous abs and a riding velociraptor, you can't deny most of his teachings are plain common sense (emphasis on "most", as in "not all"). You see, I believe in ancient wisdom. Our ancestors learned from their mistakes and put their findings in writing, and although most of the time they don't explain themselves clearly, upon deeper analysis you can find there are good reasons for these laws; even if you find said reasons are obsolete today.

Take pork, for example (mmmmm pork). Many religions forbid eating pork. I'm sure most people think this is pure superstition if not downright stupid. Then, there's also bacon (a very valid point), but let me share a little anecdote with you. I live in a country that still employs the tradition of cooking whole pigs over an open fire. While it's certainly good eats, even with modern-day sanitation standards I have gotten sick from eating pork cooked like that. Once it was so bad, I couldn't eat pork like that for years, and still won't do if I don't trust the source. If it hadn't been for modern-day medicine, I could have possibly died. It was definitely a bad idea to eat pork 2000 years ago, but it was very hard to explain why.

It was a bad idea to charge interest 2000 years ago. It still is today. It's still somewhat hard to explain today. I'll still try.

Many of those against usury believe charging interest is wrong because you'd make profit without working. Here I am, all rich and fat, charging interest from the poor, getting richer without moving a muscle. To me that's not really it. Sure, it sickens me, but you can't blame them for trying! Besides, lending (and collecting) money is hard work! Remember, I'm in the business (although it's not my money). In addition, the renting of land, buildings and the ownership of intellectual properties are honest ways of making money out of having something, without doing much work.

Others believe the real problem is that of abuse. The most obvious example would be lenders rising rates in times of need or applying excessive penalties. In some countries, even today, people who can't pay their debt have to work for the lender; they become slaves. On the other hand, delinquency can drive a lender bankrupt. Abuse only happens in extreme cases, and the authorities can regulate it. Besides, one can see similar abuse in regular commerce (high prices, shoplifting), so one should always be careful about giving more power to those who already have more than enough. Close, but no cigar.

What is it then? Put in the simplest of words, usury makes it profitable to be rich and expensive to be poor. Therefore, the rich are bound to get richer just for being rich while the poor get poorer just for being poor, this effect reflects collectively regardless of the individual's efforts. This comes with other serious side effects. For the rich it encourages hoarding; amassing large amounts of wealth solely for lending with the goal of eventually living entirely off interest. Many wealthy people live frugal lives and never really enjoy their fortunes and even those with more flamboyant lifestyles do not spend in proportion to their income. This, in turn increases the ratio of people being born rich. In the case of the working class and the poor this encourages the opposite: excessive spending, probably because of a false perception that one can always borrow more, as a way to compensate for certain things one is perceived to be deprived of or as a way to attempt to live the lifestyle the born-rich portray as normal though advertising. The flow of goods, services and wealth becomes entirely unidirectional and as a result, the value of money for the hoarders, the born rich and the indebted is different and the line between necessity and luxury is increasingly blurred. This blur is relative to the degree of separation between the higher and lower class.

Another secondary reason I believe usury is wrong is because lending is a form of gambling. You give money to a person hoping they pay back with interest. You adjust the rates according to the possibility of the borrower actually paying. Now if a rich man makes an unwise loan and ends up losing the money, we can assume he knew the risk and he probably still has enough to feed his family. Besides, given the concern that his family's well-being is at stake he'd only lend to someone he trusts. Is it the same way with corporations? When a corporation with thousands of employees makes thousands of unwise loans that aren't paid, they just start kicking out employees and rising rates until they're back on the black. The ex-employees in turn have to default on their loans and before you know it, you have a mayor crisis across the country. I don't mind a little gambling here and there, but that shit ain't funny.

What can be done to correct this? Well, since we can't ask banks stop charging interest, perhaps we can just stop handing it to them. I learned how to do this the hard way. About 5 years ago, I decided to apply for a credit card; it was my very first so it had a very small credit line and ridiculously high rates, but I needed to get some stuff for my new job from which I was fired before I could do the first payment. Besides that card, I had also borrowed on a few other places. My credit was ruined before it was even established! All the accounts were charged off. I had to learn the hard way to pay up front or realize if something is too expensive then maybe it's not for me. When I look back, I'm glad it happened; otherwise, right now I'd be up to my eyeballs in debt.

The good news is that you can learn from my misfortune/mistakes. The first step is to re-establish a clear boundary between necessity and luxury. Once this has been defined, you know when it's OK to borrow and when you should just save and wait. In my opinion, a middle-class family should only take two loans in a lifetime: one for a house and one for a car. Everything else can be covered paycheck-to-paycheck and with savings. A big screen high-def TV is definitely not worth getting in debt. If you REALLY want it, you certainly can have it, just start saving for it! In the end, you'll value it more and it'll cost you a lot less.

If you still insist you need it NOW, then under no circumstance use a credit card. Credit cards are too volatile, at any time they can change your rates, credit limits, fees or services. In addition, even the most reputable institutions will occasionally send you an invitation for some obscure "service". By invitation I mean a letter that congratulates you for been selected and advising you to call as soon as possible if you wish to opt-out; by the time you find out it's too late to object. Instead, take a loan from a small bank or, better yet, a local credit union (at least that way you're not making the fattest man fatter) with a fixed rate, due date and balance. Make sure you read the small print and compare all the choices before you sign and keep a close eye on any piece of paperwork they send you.

That's all I have to say… o yeah, post a comment!