Headlines seem to be a bit like movie titles. I understand there is no prohibition or law against using a movie title that has been used before, and I think book titles are the same. Similarly, headlines are apparently made up at the whim of editors and their staffs, probably with as much concern for space as for accuracy. Some headlines give me a chuckle. Take for instance, “Pope Condemns Middle East Violence.” Wow, that’s a shocker, isn’t it? Or how about, “As Bull Market Passes 2 Years, Rate Of Return May Slide.” There’s a revelation for you. Flash news: the market might go down. Hmm.
Back on February 22 there was a Globe headline, “Looking For A Credit Card?”, followed by a smaller caption, “It pays to be rich: Best rates reserved for A-list consumers”. Judging by the headline one would assume that budget-challenged consumers are being treated unfairly. The underlying AP article reveals that new legislation, called the “CARD Act“, is resulting in predictable behavior by banks. They are raising fees and interest rates, but are treating A-list customers better than ever. Why? The new legislation prohibits banks from hiking rates on existing balances or in the first year an account is open, caps late fees and requires users be told explicitly about projected interest costs if only minimum payments are made. So, the banks are scrambling to make up for lost revenue.
What is an A-list customer? It’s someone who uses their card a lot but does so responsibly and therefore has excellent credit. Presumably such users pay off their full balances each month. So, what, I ask, does this have to do with being rich? Do users pay off their balances because they’re rich, or because they’re smart? I submit that both reasonings fit equally well. Hence, a better sub-caption might have been, “It now pays more than ever to be smart with credit”. The editor’s choice of phrase is telling because it seems to assume that only the rich can afford to not carry a balance. Bunk.
As a nation we all stand to benefit from efforts like the CARD Act. The more sensibly consumers manage their money the more stable will be the economy and the less likely we are to have millions of future homeowners under water on their mortgages. While I favor smaller government in general, and government getting out of the education business altogether, the creation of things like Elizabeth Warren’s new Consumer Financial Protection Bureau (CFPB) is a clear exception. Anything that promotes responsible financial behavior is downright patriotic in my opinion. This is a good example of how government is needed to serve as the governor on the engine of capitalism.