John Stossel vs. Slate on Credit Cards


In his syndicated column, ABC's John Stossel throws cold water on Washington's latest abuse of the "Bill of Rights" suffix, in this case the Credit Cardholders' Bill of Rights.

Think about what a credit card is. It's convenient access to unsecured loans, permitting consumers to buy things large and small—not to mention emergency services—without cash. Pay the bill promptly, and you enjoy a fantastic service for virtually nothing. If circumstances prevent you from paying the bill in full, you can set your own payment schedule, realizing there is a minimum payment and that you will be charged interest on the unpaid balance. No surprise there.

To appreciate credit cards, it is worth recalling that before they came along, people got personal loans from banks, finance companies, pawnshops and loan sharks. Such loans were less convenient, and repayment was less flexible. Some people bought things on layaway, which meant they didn't take the goods home until they were paid for. Loan sharks sometimes broke people's legs.

Credit cards didn't create consumer debt—they are merely a superior alternative to older methods.

As President Obama and other politicians demagogue this issue, keep two things in mind: Life would be more difficult without credit cards, and banks don't have to keep issuing them. Be careful what you ask for. […]

The "bill of rights" seems designed to prevent people from getting themselves in over their heads. That motive is honorable, but government has never been very good at such protection. The law of unintended consequences cannot be repealed, and what government gives with one hand, it inadvertently takes away with the other. Increasing the banks' costs will make it harder for poorer people to get credit cards, and that will only push them into costlier forms of debt, like payday lenders.

I've never understood how the poor are helped by limiting their choices.

Whole thing here; link via Volokh co-conspiracist and credit academic Todd Zywicki.

For a different and arguably/sadly more mainstream view, read this Christopher Beam piece in Slate making "The case for government-backed credit cards," preferably ones with an image of President Obama himself. No, I'm not kidding.

For a big stack o' Stosselania, start here.