By Farooq A. Kperogi
The reason my friend was not allowed to buy the cell phone was because he had no credit history. The cell phone company couldn’t determine if he was trustworthy enough to do business with. And this is true of most of other things people buy here.
If you want to buy a car, a house, or even rent an apartment, etc companies will first require that your credit history be reviewed. You can’t be trusted until it can be shown that you’re a creditworthy debtor. It seems to me like a grand corporate conspiracy to hang debts around the necks of people who live in this country.
Corporate America has succeeded in instituting the credit card as the ultimate measure of people’s honesty, reliability, and fitness for business. This is done through what is called credit rating. It is the measure of how regularly you repay your debt and the interests that accrue to those debts.
Information about people’s credit history is collected by, and preserved in the databases of, “credit bureaus,” and is often available within seconds to all businesses that need it— for a fee. But every credit card holder is entitled to a free credit report at least once every year.
A person who pays his debt and finance charges every month consistently is adjudged to have a good credit rating and is entitled to further increases in his credit line, i.e., more debt.
There is even a more worrying phenomenon called “predatory lending.” By this is meant the practice of credit card companies targeting young, cash-trapped university students with exploitative offers that ensnare these inexperienced teenagers into debts that they must repay for the rest of their lives. The U.S. Congress is currently trying to legislate against this corporate predation.
Do people run away without paying the credit card companies? Maybe sometimes. But it is indeed rare. This is a highly organized society where the law is truly supreme. Before you’re given a credit card, you must be a citizen or a legal resident, and must have a social security card, which contains all your personal data. You must also have a regular job.
So, in a way, when I say everybody here is a debtor, I exaggerate a bit. There are at least three categories of people who can—and do—escape the debt trap. The first are the stupendously rich. I can’t imagine that Bill Gates and people in his class have credit cards. But I may be wrong. After all, the founders of Google were reported to have set up the search engine from credit card funds. They were too poor to finance the venture from their personal finances. Today, they are multi-billionaires and probably still have credit cards, even though they really don’t need one.
The second category is people who have no history of regular income over a considerable period of time. Credit card companies don’t issue credit cards to such people. And they reject their applications when they apply for one. However, jobless people with no steady income constitute only a fraction of the American population. I think the latest data says they are six percent of the U.S. population.
The third category is people who have deliberately refused to accept credit card solicitations for personal or religious reasons. Such people simply damn the consequences of their action. I know of a few conservative Americans who have refused to own a credit card. They build their credit history, if they care for one, from other sources, such as paying their bills on time, etc.
I include U.S.-based Somali Muslims in this category. A recent study found that Somali Muslims— most of whom have resolutely resisted integration into the American debt culture—are the poorest and most unsuccessful immigrants in the United States. I was not surprised in the least when I read this. In this country, you cannot get anything if you don’t have a good credit history, and the surest way to build your credit history is to have a credit card.
But more than that, because this is a truly cashless society, credit cards have become the chief instruments with which people transact business. The debt culture has been so thoroughly ingrained in the consumer behavior of Americans that paying lots of cash for a purchase can even attract needless attention to you from law enforcement agents.
Since most people don’t buy houses cash down like we do in Nigeria, a good credit history is crucial to getting a mortgage to buy a house. As you probably know, a mortgage is a loan from a bank to buy a house. Technically, the bank owns the house until you repay the loan—and the interest— in full. However, since they are only paying rent to the bank, people cherish the illusion that they own the homes.
A friend of mine in Louisiana who is in his late 40s bought a huge, palatial house worth several thousands of dollars with a loan from a bank. When we calculated his monthly payments and interest to the bank, we realized that it would take him another 45 years before he can truly own the house. I told him to stop deluding himself that he can ever own the house since the average life expectancy of white American males is 78 years.
His response was as insightful as it was unnerving. “As long as I am alive,” he said “I have a house with all its comforts. I don’t care what happens when I die. The bank will either take back the house or my children will continue paying the debt when I die. I, like many Americans, have literally mortgaged the future of my children. But who cares?”
Maybe he is right. Maybe not. While the debt culture gives people a sense of financial security, this security comes with a price because it is false. It perpetually holds you prisoner. Perhaps, I am yet to outgrow my cultural socialization.
Well, in most cases, if the children are able to repay the loan, they would almost always sell the house, get a bigger mortgage and buy an even bigger house whose loan they too cannot repay in their lifetimes. And the cycle continues.
So when people say they own their own homes here, they are actually merely saying that they no longer pay their monthly rent to landlords or landladies; instead, they now pay their rent to banks or mortgage institutions.
Well, perhaps, paying their rent to the bank rather than to the landlady is different, even better. At least they can sell their house when its value increases, repay the bank in full, purchase a less expensive house, and in the process make some profit.
I got my first unsolicited credit card from my bank here after a year of being a customer of the bank. For six months after I received the card, I was undecided what to do with it. But I was well-advised against returning it, and, in retrospect, I am thankful for the advice.
I got my second credit card from the bank of my alumni association. With two credit cards, I think I have more than enough. But I receive at least 15 credit card solicitations every month. All the credit card companies share information with each other, and I am a good target because I pay off all my debt.
The best way to survive the credit card culture, from my experience, is never to spend more money than you can afford to repay at the end of the month. When you pay off all your debt at the end of every month (not just the 10 cent of what youb have spent in the month), you pay no finance charges. And your credit rating soars. More importantly, don’t have more than two credit cards.
We are all debtors here—in my case an unwilling debtor. As you can imagine, it’s not a great feeling for someone who has been brought up to have ice-cold distaste for debt. But when you’re in Rome and you want to behave like a Siberian you’d better go back to Siberia—or remain miserable in Rome!
Nevertheless, this borrow-and-spend mentality is not just limited to individuals. The American government is the biggest debtor nation in the world. It owes China and Japan trillions of dollars. Yet one of Obasanjo’s greatest “achievements” was that he paid off our national debts. Some achievement!