Allure of credit card
Source : Google photo of credit card
Synopsis : The credit cards are now as common as flies everywhere. People can’t seem to live without it. The society demands it, the business people demand it, the capitalistic system demands it so one must have a credit card. It brings instant gratification that the society demands. But the credit card companies are not responsible for your debt and your unhappiness. The blog looks at the downside of credit and shows how fiscal discipline can go a long way to bring financial stability in anyone’s life.
One day somewhere in the United States a gentleman walked into the show room of a car dealer and saw a new car that drew his attention so he asked the approaching young car salesman about the car and its price. The salesman looked at him up and down to assess his worth and how serious he was before he would give him some information because the gentleman was Asian so perhaps not a serious buyer.
Still the man asked for the price of the vehicle after walking around the car and looking at the interior so the agent told the price and asked how he was going to finance it meaning how and from where he was going to get the bank loan. The Asian gentleman then said that he is not looking for a bank loan and will finance the car himself.
The agent was incredulous and could not believe his ears so he started to walk away because he decided that the man was not serious and was not worth his time. Whoever had heard of a cash buyer? Everyone looked for financing and trade ins and then the bargaining began in earnest.
No one paid the sticker price so a good bargainer knew that there was plenty of room for discounts and some added freebies but this man did not ask for any discount and freebies so he is perhaps not a serious car buyer so he walked away. Besides the man looked foreign and not very well dressed so that created another negative impression on him.
Now an old salesman was listening to this conversation and came to assist. He very politely asked the gentleman to sit down, have a cup of coffee and profusely apologized on behalf of the young salesman saying that the fellow was young and did not have much sales experience.
The prospective buyer listened with stony face and was about to walk out but the old agent prevailed and showed the car, opened the engine compartment to show the technical features and the interior entertainment system etc. He also gave him a very beautiful colored brochure that had all the details so the man was satisfied and said that he will be back shortly.
Sure enough, after sometime the man walked in and put on the table a bag full of money, signed the papers and got the key to his new car and drove off leaving the younger agent totally flustered because he had so badly misjudged the Asian gentleman and lost his commission which was substantial.
In a country where almost everybody uses credit card, it was quite unusual to get a cash buyer so he did not take the customer seriously. He also did not have any knowledge of Asian culture or about the outside world but the older man knew.
It also happened to me when I went to a show room of Mazda in Manila where I was looking for a two liter sedan. The ugly pockmarked agent behaved just like the American and walked away from me because he did not believe me as a cash buyer. I too walked out and went to Nissan where I was very well received and where I bought a beautiful Altima with cash.
Now we live in the era of credit cards. The banks constantly call us and offer free credit cards that we refuse to their great surprise. Whoever refuses a credit card? It is a status symbol for people who have plenty of credit cards in their wallet.
But an American comedian who made plenty of money telling jokes gave this piece of advice. He said that he never took credit in his whole life and pays for everything with cash. He sleeps well and never worries about his pending bills. He never bought anything he could not pay for with cash and it is probably the best advice he has given but who listens?
The allure of credit card is very strong so people are greedy for it. Just buy anything using your plastic card and walk away for a while. The bill will come surely with added surcharges because that is how the credit card companies make money but the honeymoon period is yours to enjoy for a while.
You cannot rent a car there unless you have a credit card. The gasoline stations will not take your cash after 5 pm so you must purchase gas with your credit card. There are many robberies of gas stations late at night so they do not like to keep cash after 5 pm when someone comes to collect it.
When you want to buy expensive things like a house or a car , then you should get financing for it and sign the mortgage papers. The loans are often arranged by the dealer of the car or the real estate agent so you just have to sign the papers that bind you to the loan until your death or the crash of your car whichever comes first.
People have grown up in this credit culture that is actively encouraged by banks and credit card companies so they offer free credit cards to high school kids who are yet to learn about money management.
The frequent bouts of family quarrels are often linked to money woes that start to pile up and make people desperate to escape the debt trap. People buy groceries, clothes, pay for vacations and gambling in Reno and Las Vegas. There is absolutely nothing you can’t pay using your plastic card. The only caveat is the downside of taking too much credit that your income falls short of accommodating.
The credit card companies keep a very close tab on your purchase and the frequency, the amount and even the location and the purpose to judge your credit worthiness so if you pay your bills on time or before time all the time then your rating goes up meaning you are a good customer. 700 plus score is a very good score and a lower score means you do not pay your debt on time which means further credit to you may be denied. Now in the United States there is a law that can freeze your credit until you have cleared up all your past debt plus the interest.
Remember when the housing market collapsed a few years ago there? It was because the banks gave loans to those people who could not afford to buy their houses or pay their monthly mortgage so all of a sudden millions of people saw their houses foreclosed and they were pushed out onto the streets.
We now live in the era of instant gratification that the credit card offers and can’t wait to get a new house or a car or a 60 inch OLED TV . The whole idea is to get everything now and worry about how to pay for it later. You will see almost brand new cars parked in front of banks that have recovered these cars from people who could not pay the monthly amount so lost their initial down payment. People who lose their homes also lose their down payment which can be substantial depending upon the total value of the house.
Now there are many who are good earners and savers so they accumulate a substantial amount before they decide to make a purchase of a car or something expensive. In a country where everyone uses credit card, cash is still the king so you get the least price if you show them your money.
Some use the convenience of using the credit card because it is so easy and you do not have to carry a lot of cash all the time. They pay off the credit card bills before the due date meaning within a month or so .This way they avoid penalty but they have the fiscal discipline and a good understanding of their liabilities. It does not work if one person is very punctual in paying his debt but the wife does not so they may end up quarrelling about money a lot that may have its own consequences.
The fiscal responsibility is learned process and it starts long before a child starts to handle serious money. He learns from his parents about it and knows that his parents do not take credit anywhere so he learns the value of living a debt free life.
He learns honesty from his parents and saves his pennies in a piggy bank where his parents also drop some extra change once in a while. I had a piggy bank when I was very young and was delighted when it got full and I broke it open to count a pile of coins that I used to buy something that I needed. It did not put money pressure on my parents so they encouraged me to save. This habit stayed with me all my life but I also learned to develop the discipline.
In many Asian countries, credit is a dirty word so people become good savers and pay for everything including a car just like that Asian gentleman I mentioned earlier. Some even pay for their new house with cash or build their own house with cash the way we did.
I think people get into the debt trap so easily because they want to compete with their neighbors or their coworkers. If they have a new car then you must also have one. If they have the new model of I phone or I watch then you must also have it.
We have a neighbor who brags about her latest gadgets all the time and wants to know when we will get ours. She does not believe us when we say that we are not gadget freaks and are quite happy without them. Some neighbors pass by and make comments like when are you going to change your car? There is nothing wrong with our car but people change their cars every year and roll over the debt year after year.
It is also a matter of false pride that they are driving a brand new car never mind if it is on credit. Everybody does it so that is the culture.
To learn the fiscal restraint is to develop the discipline to say NO emphatically because it provides the mental peace that the credit card does not.
I knew a fellow who had the gambling habit so he started borrowing money from some very bad people just like the mafia and lost his house . Still he could not pay back the debt so one day he ran away and abandoned his wife and three children so his wife sought the help of her siblings who bailed the fellow out and saved the family and their marriage. It is not known if the fellow ever paid back the money to the siblings of his wife. He is dead now so the issue is moot.
The rivalry starts early in the life of children who see their classmates or school mates with the latest I phones or other gadgets and start pestering their parents for the same because they feel deprived if they do not have what others have. This is the start of the life based upon pure consumerism that is the hall-mark of the capitalistic system. It teaches the kids not to take anything seriously so they can destroy their new expensive toys easily because the parents will get them a new one.
If shredding expensive jeans with razor blades is the fashion then they must also do it and get new ones to shred because that is what others do in their high schools. It does not matter to them how much it costs because the parents will provide them if they pester them long enough.
Some parents encourage such behavior in their children especially if they were poor growing up and felt deprived so they want to make sure that their kids are not deprived of anything even at the risk of serious debt.
I will now tell you the merits of saving. When you get married and have a good job that pays you well, you have the opportunity to start saving for the baby you just had. May be you will have a second child a few years from now but surely one day they will grow up and will go to school. By the time they are ready to go to the university, you will have saved enough for them to attend any university anywhere and pay for all their expenses. That is called discipline.
There are millions of teen age students who get easily indebted in college to the tune of tens of thousands of dollars that they must pay back once they start working. The student loan debt in the United States runs into billions of dollars and is at a national crisis level now. It is because the parents were unable to save for their kids.
The most expensive thing to pay for is the house that someday you want to live in that can turn out to be the gigantic debt trap that many are unable to escape from and lose their shirt on it someday.
Another thing to worry about is the enormous cost of health care that can bring disaster to any family that is not prepared for it. We get sick or get into an accident. It can happen to anyone anytime but how many people are prepared for such extraordinary expenses all of a sudden?
I started out with the topic of credit card so it is fitting that I end with it. I have never wanted to live on credit and never did. I was very lucky that my wife shares my beliefs and tells me that it is a good feeling not to be in debt and sleep well. We never worry about bills and our routine expenses because we prepared ourselves since we got married. Our kids attended the best university and now have very good jobs. We live in our own house that was built with cash.
Because we do not like credit card. If the simple plastic card has so much power over you that makes you unhappy then definitely it is not worth it.
Note : My blogs are also available in French, Spanish, German and Japanese languages at the following links as well as my biography:
via Slum Hunde
via Slum dogs
Source : Google photo of Johnny Miller’s photo of Dharavi slum in Mumbai
Synopsis : The vast slums accommodate the poor and the destitute in many countries where they try to make a living to survive. They come from the hinterland where life is hard as farmer so they seek an alternative in cities where they find odd jobs. This inequality exists between the rich and the poor in most countries. This blogs focuses on reasons and the ways to bridge the gap.
Someone said that all men are born equal and have the same rights and aspirations as any other. Others say with a smirk that yes but some are more equal than others. Nowhere this is more evident than in the picture above taken by Johnny Miller of Mumbai slum called Dharavi that coexists with the posh development just across the dividing line.
Dharavi is the largest slum in India that houses hundreds of thousands of poor people in the financial capital city of India also known as Bollywood that is home to the largest film industry in the world. As you land in Mumbai ( previously known as Bombay) you will fly over the slum just before you touch down because the slum starts just from the perimeter of the airport and extends to the distant horizon.
It is vast and is densely packed where not even a ten square foot patch is vacant. It was featured in the movie The slum dog millionaire
( watch the movie hit song here ) that raised great indignation in India because of the word slum dog but the movie showed the stark reality of the slum dwellers when a kid jumped into the toilet pit and was covered with human feces so that no one would dare touch him.
Dharavi is like a stinky reminder that the poverty exists side by side with the rich people in the richest city in India and festers like an open wound in otherwise an economically growing nation with the highest rate of GDP growth in the world. People who come to Mumbai with the hope of making a living find it extremely difficult to find shelter although some get odd jobs so they end up in the slums that are practically bursting at seams as they can’t expand any more so can’t take new residents.
There are plans to level the Dharavi slum entirely and build low-cost apartments in a very planned way that will include parks, schools, health care facilities and sewer lines etc. to make it a model town where the poor people will live in comfort and security but it only remains a pipe dream so far. Where will these slum dwellers go while their only living space is bulldozed to make way for the new model town? How can anyone even think of moving such a large number of people unless there is an alternative site built for them to move to?
In every country you will find this stark inequality that exists side by side with the affluent. You will see the poor and homeless people sleeping in the corners of subway platforms in New York or in the Central Park on cardboards and covering themselves with plastic sheets or rags while just across the streets rise tall skyscrapers where millionaires have their pent houses looking down on the park.
You will see this in Cape town and Johannesburg in South Africa where the white people live in fancy suburbs but just across the dividing streets you will see the slums stretching away covering vast areas.
Source : Google photo of stark inequality ( Photo taken by Johnny Miller)
Source : Google photo of inequality in South Africa ( Photo taken by Johnny Miller)
When we were visiting South India , we saw a signboard of an office that says Slum Eradication Office in Chennai. There the local government is keen to show a clean city with modern facilities so comes down hard on slum dwellers who occupy valuable land so they are asked to move on to other parts. I am not sure if the poor are given alternative sites to put up their shanties but we did not see any slums in Chennai .
Can any government just move the poor people and not provide them with alternatives ? In the Philippines there are some two million slum dwellers in Manila alone although some people may dispute this figure. What matters is that a very large number of very poor people live in Manila in slums where they survive or try to on very poor wages they earn as menial workers in the city.
Dharavi in Mumbai is also like that but with a difference. There they have opened up shops and even small manufacturing shops where they recycle waste plastic and metal cans into plastic wares and metal wares that they sell . One fellow was asked how much money he made from garbage, he answered that on the average he made about 30000 Rupees a month working only part-time. This is more than the salary of a bank manager.
So the slum dwellers are not totally destitute because they manage to earn a living somehow but cannot move away to better housing somewhere that is out of their financial reach. Their proximity to the rich neighborhoods gives them the opportunity to get temporary jobs of washing clothes and doing other odd jobs for the rich.
Those who are more enterprising make money out of garbage and call it a part-time job. What they do with their other time is anyone’s guess . The crime thrives in the slums in any country because it is quite profitable. You can intimidate the people with threats of violence to gain some advantage easily but I was told that a sort of social justice prevails even in the densely packed slum of Dharavi where the policemen do not dare to show their faces.
The failed poor housing projects in New York or Detroit where the government has built huge ugly monolithic tenements are a testament to the waste of money to house the poor. It has failed because the tenements are shoddily built and not maintained so you will see the broken window panes covered with plastic sheet, broken elevators and stairs strewn with garbage. Crime festers there and people are afraid to live there but have no other choice.
The question to ask here is why in a seemingly fast developing country like India or South Africa, there are such inequalities and what can the government do about meeting the aspirations of the very poor ? The development of any country that is not inclusive means little unless the poor are uplifted from their miserable life.
I have heard that the Government of India is promising to house everybody by 2022 but it remains to be seen if such a bold statement is backed up by the progress on the ground. The scale of the problem is staggering to say the least. It will cost billions of dollars to build even very modest homes for the poor because the land cost alone is very high near any big metropolis . The cost of the development of the land, building roads, sewer lines, water lines and bringing electricity etc. that a functional township requires is very high and the rate of return is very low so the businessmen in the private sector are not interested.
They develop fancy suburbs for the rich middle class but not for the poor so the task of taking care of the poor falls on the government that has to find money to do so through taxation or other means. It is proven that the poor also contribute to the development of the country by paying taxes and by being self-reliant. They do not seek government jobs or in the private sector because most of them are self-employed.
I now want to see what China has done to uplift the poor . As we all know , China has now become the manufactory of the world because of the emphasis on being self-reliant and making exported goods their main source of income. They have succeeded beyond anyone’s imagination thus creating jobs for the millions there.
I think the job creation is the key that provides people decent wages to live on but they also built huge housing facilities for the factory workers in every city so you will not see the kind of slums that exist elsewhere in the world. No one really wants to live in a slum and be called a slum dog. Life is precarious there and crime festers like an open sore. Poor people have the same aspirations as anyone else and want to live in a clean apartment with water, electricity and healthy living environment. The children would love to play in a park where everyone can breathe fresh air.
China has lifted some 350 million poor people out of their poverty and continues to improve the lives of the rest making it a good example of what a determined government can do and achieve. Other countries can learn from China and apply these lessons at home. The figure of 350 million can be disputed by some but the fact remains that the poor are living in better conditions now than ever before.
The inequality in any society in any country will always exist due to the socio economic stratification that favors one stratum over the others so the poor people will not just disappear in populous countries but significant improvement of their lives can be made if the government is determined like in China.
The other part of this uplift comes from land reform that many countries have tried but only a few like Cuba have succeeded. If the poor people are given their own land to cultivate then they become self-sufficient and even sell their excess produce to make money. They will not leave the countryside to move to slums of cities if they are given the chance to cultivate their own land so the land reform is a must.
In many countries, the prime agricultural lands are owned by the rich people who then make use of sharecroppers to cultivate it and make profits. The rich cannot dirty their hands to they depend on the sharecroppers to do it for them but the poor farmers remain poor as they have no incentive to work hard for the rich landlords. The land lords who always show up at the harvest time to collect their more than fair share of the farm income are apathetic to the plight of the farmers and often eject them if they fail to give them a good income.
The sharecroppers are no fools so they too devise ways not to pay back their land lords the agreed upon share by saying that the crops have not done well or there was no rainfall and the insects ate the rest etc. But this changes when they become the owners of their land.
The good example is the state of agriculture in the old Soviet Union where the collective farms were the practice where the state managed the agriculture through directives but the farm workers had no incentive to work hard to make the land productive. There was wastage, inefficiency in production and storage , in distribution and in generating income for the poor. This changed dramatically when the old system was replaced by the new Soviet Russia where the farms are now being cultivated by the farmers and are making good use of the land. No one wants to go back to those collective farms.
But it took Cuba a revolution to chase out all the rich land owners and redistribute the land to the poor farmers that irked the Americans who had been exploiting Cuban riches and were now deprived of it so they made trade embargo that continues even today.
However, Cuba has survived and has become self-sufficient in food , has generated employment for the farm workers who do not flock to cities to create slums like they do in other countries. They also have the highest literacy rate in the world, the best healthcare system in the world and have become a progressive country not depending on IMF hand outs so a country like Cuba can only go up and not down.
China also had a revolution in which millions perished in wars, millions died of famine due to wars that they eventually won and started on the path of development that has not stopped in spite of threats and sanctions.
The vast majority of poor people come from the countryside in any country. They move to cities because they can’t make a decent living in the rural areas. The inequality that is seen in the slums of Dharavi or in Manila continues because these poor people can’t go back to their rural homes where the life is hard and very difficult so they seek jobs in cities to survive.
I believe that as the countries develop agriculturally, industrially and the infrastructure, they create more and more jobs for the poor so a day may come when the poor people of this world will be uplifted to become the middle class because we have seen this happening in China and India, the two most populous countries in the world. This will reduce the inequality to a great extent although may not eliminate it altogether.
What do the poor of this world have to do to survive in the meantime ? They move to slums where they have a fighting chance to live and be self-employed.
Never mind if they are called the slum dogs.
Note : My blogs are also available in French, Spanish, German and Japanese languages at the following links as well as my biography: