Taking credit

I was going to share some data with you on U.S. credit expansion, which has been growing at a horrifically huge rate, and which will eventually rock the entire world, Saipan included. But some of these numbers are so outlandish not even a cynic like me can believe them, and I have to investigate them first. But the overall picture remains the same: Something really spooky is lurking in the shadows of America’s credit system, and when the whiplash hits, the open credit doors are going to slam shut.

Which leads me to this suggestion for the Commonwealth’s households: As long as credit is being extended to anyone who can fog a mirror, now is the time, if you so desire, to get a credit card, or more credit cards, or bigger credit lines on your credit cards. Standards seem to be so lax these days that even boonie dogs are carting platinum cards.

I’ve never understood the so-called “evils” of credit cards that some folks whine about. Every springtime, there are sob stories run in the media about some dumpy, unemployed single mother in Hammond, Indiana, who charged $7,900 worth of holiday garbage on her credit cards and can’t pay the bill. Blaming credit cards for stupid behavior is like blaming cars for drunk driving.

The fact is that credit, yes, credit, is what money is. Bank loans, in specific, are the backbone of the U.S. money supply. Currency, by contrast, those bills and coins you stuff in your pocket, is typically only about 10 percent of what we consider “money.” Credit IS money. Hmmm…that’s kind of scary when you think about it, and may have “house of cards” and “economic Armageddon” written all over it. In fact, I’m sure it does…but even so, Armageddon won’t be any harder on you if you’ve got some juicy plastic in your wallet.

There are some caveats lurking here. Sleazy credit card companies can really be a pain in the neck; nobody, not even Shakespeare, said that all moneylenders are nice guys. So it’s a “user beware” gig, and you have to research the reputation of the company at issue. Capital One, for example, is a notoriously aggressive marketer, and they are also, in my opinion, a very untrustworthy bunch; I’ve never dealt with them that I remember, but I know people who have.

One sure bet, incidentally, is American Express. These guys aren’t sleazy bottom fishers, and for anyone who is looking to get established in the credit card realm, I highly recommend good old AmEx. When I was a kid I puked all over the AmEx office in Paris, which turned out to be quite a spectacle for all the businessmen in immediate proximity, so I figure now that I’ve plugged their products here, we’ve even. So, get the AmEx…but skip the escargot (trust me on that one).

And, of course, some local banks issue major credit cards, so that’s an obvious place to start.

I’m still surprised at the number of folks on Saipan who simply have bypassed getting a major credit card. Many, I’m sure, have their reasons. But the fact is that without credit cards, life can be mighty hard, especially if you plan a trip off-island. Some automated airline check-in kiosks require a credit card for identification. And, rent a car? Nope, not without plastic in most places I’ve been. And I’d rather tote a credit card in some strange and dangerous land in my pocket than cash, wouldn’t you? I’ve never paid cash for a hotel room (not that I’ll admit, anyway) but I’ve been told that some hotels won’t take cash guests who don’t have credit cards.

Meanwhile, I don’t understand all the griping about high interest rates. If you pay the sucker off every month, you typically skate on the interest. How can anybody complain about that? In fact, in this scenario, the interest rate is actually negative because you’re getting the use of the money for free! Who else would give you that kind of deal? Your brother-in-law? Ha! In fact, this is the only mechanism that I am aware of that allows average people to get the free use of money (though an actual cash advance does draw a bit of blood from your financial flesh).

But this free and easy credit paradise is not going to continue forever. While you’re laughing at the economic clown show on Saipan’s Capital Hill, which really is getting even funnier, credit markets in America have their own weirdness brewing, so now is the time to lock into credit if you think you’ll want it in the future.

(Ed Stephens, Jr. is an economist and columnist for the Saipan Tribune. Ed4Saipan@yahoo.com)