We all have some basic idea of how banks make money. They encourage us to pay our earnings into their central reserve, and then use that reserve to give out loans. We pay them for the privilege (and service) of those loans through interest – which replenishes the reserve plus a little extra for the bank. Of course, there are various other money-making systems at play – some more salubrious than others – but that’s the basic narrative we’re taught to believe in. Sounds fair? What about when those ‘loans’ are so subtly given that we’re barely aware they’re occurring? When they’re deliberately shrouded in layers of obfuscation? When there’s a whole system of cultural conditioning in place which is designed to stop us from thinking about them? And when they’re a permanent source of needless stress? Sounding less fair? Congratulations, you’ve started to wake up to the big con that is credit.
‘Credit’ used to be something which we extended to people we trusted – exchanging goods or services ahead of payment. Someone’s ‘credit score’ was a note of their trustworthiness. Those who regularly paid off their tab had ‘good credit’. However, it’s since become rather less informal and rather more ubiquitous. When banks started extending ‘credit’, it became a form of unsecured loan. A credit card or an overdraft essentially gives you a small loan, which you’re then expected to pay back at a later date, plus a fee for the service. Useful if you need money in an emergency. However, we’ve been conditioned to think of financial credit not as something to be used in an emergency – but as something to be used all the time, in order to furnish ourselves with things we don’t need, using money we don’t actually have. Almost everyone has credit card debt, regardless of their earnings or assets. Credit culture, when you pick it apart, is decidedly bizarre. Worse, it’s causing a lot of misery. Accumulated credit-based debts have caused a lot of people to need a lot of help without even really noticing that they were getting into trouble before it was too late. Something needs to be done.
Almost every major financial commitment we make is predicated by credit. Now, it makes perfect sense to establish the relative trustworthiness of somebody if you’re extending something like a tenancy or a mortgage to them. However, other methods of doing so (references, guarantors etc) have fallen far beneath the obligatory credit scoring so beloved of banks, real estate agents, and anything else which requires some form of financial contract. A bad credit score can really put the kybosh on a lot of essentials. It could preclude you from a cell phone contract, or prevent you from finding somewhere to live, for example. However, having no credit history at all will also do this. Strange though it may seem, banks and other lenders display marked prejudice against those people who are canny enough to never use money which they do not actually have. While some may say that never having used credit is an excellent sign of prudent and reliable fiscal practice, it appears that the financial institutions disagree. Why? Because the economy runs on credit, and big business (particularly banking) requires the majority of people to be in at least minor debt at any one time in order to keep generating profits. A huge factor behind the relentless pushing of unnecessary consumables is the drive to get people to spend money they don’t have. If people can be herded into a mindset which demands the immediate fulfillment of luxury consumer urges – regardless of either personal finance or need – then they will purchase things with credit, and spend the rest of their lives paying the banker’s bonuses through their credit card interest. That’s why the importance of material goods is played up, and the pitfalls of credit played down in our culture. That’s why the (very accurate) term ‘Credit Crunch’ was swiftly stifled in reference to the 2008 crisis. And that’s why life is made difficult for those who prefer to spend only money which they actually possess.
Cutting Out Credit
While credit may allow us to have nice things, it’s not so great for society, and it’s not so great for our mental health. A society in which the majority of people are kept yearning after pointless Stuff in order to keep those at the top rolling in dollars is not exactly a Utopia. Nor is the niggling debt worries brought on by the persistent use of credit good for anyone’s state of mind. Modern life is stressful enough without credit card bills adding to it. Far better to cut your credit out and be done with it. Slicing up your credit cards and eliminating your overdraft isn’t easy. Banks will fight you every step of the way – and you may well find that your decreasing credit history gives you problems with borrowing later in life. But if you can live within your means, you’ll reap the dividends in personal satisfaction. Once you’ve paid off your existing credit debt, you’ll be free! No more monthly bills! What is more, you’ll perhaps encourage others to do as you have done. The no-credit movement is small, but growing. With time, perhaps we can shake the foundations of our credit-based world, and start to build something better.