The Media and the Recommendations and Warnings of Consumer Credit
I always find it amazing to read news stories and commentaries about personal finance put out by the mainstream media. Many of them seem to lack any focus in their messages to consumers, if they are not openly schizophrenic. This may be due to the fact that these large media corporations are attempting to appeal to the broadest audience possible, but conflicting stories serve no real purpose but to keep up the appearance that everything is the same even if the world and economy are radically changing around us.
Take, for example, a couple of the stories posted by MSN Finance recently. One is titled “The Credit Card Party is Officially Over,” which discusses credit card companies jacking up interest rates and the overall drying up of consumer credit. Even for consumers who have a perfect credit history, banks are cutting down on the limits offered to them on new lines of credit and are trying to discourage people from opening new credit cards in order to transfer balances from old credit cards. Overall, the article is somewhat cautious about consumers using credit and advocates them taking care of their own personal financial situations without borrowing more.
However, just a few stories down is another article published on MSN Finance, although it is taken from Bankrate. This one is titled “Why You Need Multiple Credit Cards” and deconstructs the arguments against having multiple open credit lines. The wonders of using consumer credit are boundless if used correctly, according to this article, such as the feeling of financial safety and the lure of rewards for using the card. People who use their numerous credit cards wisely will also boost their credit scores, which means that they will pay overall lower rates of interest on other debt, such as housing or auto loans.
So, the message is… what, exactly? Maybe the message is that credit may be used wisely to rack up rewards and feel safe, until the bank jacks up the interest rate and lowers the credit limit. That does not seem very reassuring, and the average person will have to decide between heeding the warnings of the dangers of credit or continuing to do their best to keep on top of a mounting pile of debt. The fact that the second article aims to reinforce spending through credit cards is not surprising: consumers should use more credit, so that they can qualify for lower interest rates on more credit. The circle only ends when the homeowners are in foreclosure or the consumers are in bankruptcy.
But of course, finding oneself in bankruptcy or foreclosure can not be blamed on the poor decisions of the consumer or the misguided advice of the financial gurus. People who do not save for a rainy day have a brain disorder is all; or at least that is what CNN Money has to say about it. An article titled “Can’t Save? Blame Your Brain” discusses the psychological differences that humans feel when given a choice of instant gratification compared to waiting for a larger reward later in time. So all those home buyers who are now trying to
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