I couldn't believe this commercial I saw recently.
Well, that's not really true, not much surprises me anymore.
Not the extent to which people through ignorance or intent can get their personal finances so screwed up, nor the lengths lenders will go to help them along that slippery path.
The commercial in question showed a guy in some store sitting in what appeared to be his own private home theater.
He's in a big leather lounger, in front of a huge widescreen HDTV, with the surround sound and so on.
The look on his face is pure ecstasy.
You can see the wheels spinning in his mind trying to figure out how to obtain this setup for himself - now! What you hear next is the pitch from Chase - that by merely using his cell phone to send a text inquiry, he can find out immediately if there's enough room for this charge on his credit card or line of credit.
Does anyone not see the absurdity in that? I mean it's nuts on so many levels its hard to know where to start.
Unfortunately, far too many will not have a clue to what I'm talking about, and if they aren't already, they will likely soon join the millions currently in debt over their heads.
For those few that genuinely want to understand what's so foolish about the above scenario, read on.
The rest may as well stop reading now - enjoy your life, good luck.
First off, no one should ever be unaware of their credit card balance - mainly because the only responsible way to use a credit card is for convenience and pay it off every month.
Secondly, you will never get ahead by living beyond your means.
Doing so, means no saving, no investing, no way to ever stop working, retire early and enjoy doing what you really want.
Carrying a balance is like paying for something 10 to 20 times over.
It's amusing that people actually invest in the stock market and yet carry balances on their credit cards.
Think about it, if your card charges you 18% interest, you can make an 18% return simply by paying it off.
That's almost twice the market return of 10% for the last 70 years.
Duh...
So here's the summary of what's wrong with the commercial above.
The guy is carrying a credit card balance, so he overpays for everything; he has no clue what that balance is; the fact he has a balance shows he lives beyond his means; he's about to live further beyond his means with another unnecessary expense, which will compound the existing problem.
Can anyone say treadmill? I was disappointed in seeing Chase air such a commercial.
I'd like to see them and others take more responsibility in not leading ignorant and gullible consumers down the garden path.
However, I have no ability to influence what companies do, and their responsibility is to make a decent return for their shareholders.
So here's an idea, stop paying Chase and start making money off them by getting rid of their card and buying their stock.
They're actually owned by JPMorgan - you know, the guys that just bought up Bear Sterns at a fire-sale price - and did it with the Fed backing the lions share of high-risk debt.
Pretty cool deal.
Bear was one who got burned by being up to their ears in subprime mortgage backed securities, when the bottom fell out.
That's another level of foolishness, but a discussion for another time.
However, not all that debt will turn out bad, and at pennies on the dollar, plus being pulled down with commercial banks in general, JP may be looking attractive.
Besides potential growth, they even pay a decent dividend.
By the way, that's just a thought, nothing said here may be construed as investment advice.
However, getting rid of credit cards, at least their balances - that, you can take to the bank!