Say No To Credit? From Banks, Sure

A recent article in one of my favorite, albeit conventional money sites, Investopia.com, has the title, “9 reasons to say no to credit”.  As I expected, these points are a mix of the good and the mistaken, overlaying an assumption about to whom the credit is owed.  I can certainly understand the bias since Privatized Banking isn’t on everyone’s lips…yet.

The premise here is that there is a lot of money, as credit, flowing into the market via high-interest rate (or with a limited time teaser) credit cards.  Very true.  All the counterfeit money (called “quantitative easing”) printed by the Fed that was thrown at their bank buddies after the 2008 fiasco is starting to come home to roost.  Expect that if this continues, (more) inflation will follow.

But back to the article.  In good faith, let me add the Privatized Banking spin to this article, point by point.

1. Financing your purchases doesn’t teach you self control

True, self control is important, but the assertion that there is never a need for finance is incorrect.  She didn’t say that, but this not a issue for the Investopia crowd.  We get that a QVC addiction ends badly.  Everyone needs to have access to a chunk of money bigger than what is in the checking account.  That’s finance.  The problem that we face is where to get it.  The standard answer is a commercial bank, via a credit card.  The other popular and potentially harrowing option is the home equity loan.  Both put you in debt to others.  The first major step in self control, while not denying reality, is to plan to capitalize your own bank and reap the rewards for years to come.

2. Financing your purchases means you aren’t sticking to your budget

Not true.  We are mixing two important and completely different subjects.  The monthly budget (or a safe multiple thereof) is what we use debit/checking accounts for.  That is not a finance issue.  Stuff happens, not just impulse buying of big TVs.  The finance problem comes up even for the most careful of us.  Even if you are an ‘“all cash” kind of person.  It won’t go away.

3. Credit card interest rates are expensive

No argument here.  A quick check of average rates is really disturbing. What you should be angry about is: interest paid to others is money wasted forever.  This will happen, if you are not practicing Privatized Banking.

4. Credit card interest rates increase when you can’t pay off your balance in full

As she notes, watch out for introductory rates. If you are paying off your card every month to get frequent flyer miles, then you are using it like a debit card, and this is not the discussion.  Miss paying off the balance (which means you pulled a chunk of money from somewhere, right?) and you are in a financing situation.

5. A poor credit score can affect your insurance rates, your work potential, or the ability to finance meaningful purchases like a home

Part of the establishment racket for sure.  Yes, you need to keep your record clean if you haven’t gotten a mortgage yet, or haven’t built up your own bank to self-finance your major purchases, including cars.  Afterwards, if the only source of your credit rating is your mortgage, it is hard to get in trouble.  Privatized bankers don’t report anything to the crony bureaus.  You are never late on a payment.

6. Poor financial habits can jeopardize your relationships

True, banking is a family affair, and you need to continually think and talk about every purchase, not just if, but how it is financed.  Breaking the financial silence in your home and larger family is the way to improve everybody.  Is the benefit or risk worth it?  How are you planning to repay yourself?

7. Financing purchases can lead to higher spending

This is the cash trap.  Savers are certainly in better shape than spenders, but it can be clearly shown that paying cash as a lifetime process will cost you a lot of money.

8. In a worst-case scenario, the habit of financing your purchases can lead to bankruptcy

True.  Not a good scenario.  If you’ve already been through this, building your own bank doesn’t require a credit rating and can solve some problems.

9. Avoiding financing can bring peace of mind

Let’s fix this: Avoiding financing FROM OTHERS can bring peace of mind. If you take total control of your savings and loans in your own bank, there is no stress.  You decide loan amounts and terms, with the flexibility of payments.  Takes adult thinking, but it is yours if you want it.

This article is well-intentioned but represents the limited box most of us are stuck in.  What is unsaid in this article is also unsaid on every cable TV financial outlet and school. Privatized Banking is a lifelong education in awareness of the effects of savings and the responsibility to invest only in ventures you understand and/or control.  Your need for finance for the unexpected as well as leverage for a better future will not go away.  There is no better teacher, with the least downside risk than Privatized Banking.