Monday, October 8, 2007
By Farooq A. Kperogi
After reading a couple of email responses to my last two articles on the debt culture in America, I realize that I probably overstated—or understated—a few facts. I hope I am able to clarify them in this piece.
A reader was concerned that I had given in to the debt culture here. He was particularly disquieted by the fact that I would be compelled to mortgage the future of my wife and daughter! I initially thought it was some light-hearted banter until I read the whole email. I wonder what I wrote to create this impression.
Another reader wanted to know if everybody in America—including tourists, visitors, etc—is “forced” to get a credit card or take out loans. He was troubled that if he gets a chance to visit here, he might be forced to get a credit card. Huh? I had not the wispiest clue that I said anything that remotely suggested that.
Yet another reader was worried that Muslims in America are surrendering to usury without any resistance. But I thought I mentioned some Somali immigrants who have resisted credit cards and mortgage loans at the cost of being pushed to the margins of the American society.
If these responses are representative of the sentiments that my pieces have evoked, then I must have “miscommunicated.” And that’s not a light self-indictment for someone who has been studying, practicing and teaching communication all his adult life. But perhaps the blame belongs elsewhere.
The constraint of space that I habitually have to grapple with when I write, as all newspaper writers know, compels me to abbreviate—sometimes even omit—certain thought processes. So, perhaps, I occasionally relapse into elliptical writing, and a lot of information is implied without being explicitly stated.
Now, let me restate and clarify some facts that I may have muddled in my first two pieces. First, nobody is forced to own a credit card here. It is entirely voluntary. And it is only available to American citizens and legal residents here.
Tourists and visitors—and certainly tourists and visitors from Nigeria—are unlikely to get credit cards even if they apply for one precisely because there is no assurance that they will pay back their debts since they have no bank accounts here and will only be here temporarily.
Tourists from other Western nations probably already have credit cards from their own countries, which are accepted here. But most visitors and tourists who come here and don’t want to use cash to transact businesses often use what’s called the traveler’s check. It operates just like ordinary checks (that’s the American spelling for cheques!).
Additionally, you can, at any time, opt out of a credit card after you acquire it—provided you have paid up all your balances. And when I said most people don’t pay up the mortgages for their homes in their lifetimes, I ignored an equally large number of people who do. They do this by saving and paying substantially more than the minimum monthly payment. In this category are a lot of immigrants from deprived backgrounds who appreciate, and make very good use of, the opportunities here.
The whole point of my series was to show how Western economies, as people who travel internationally know all too well, are becoming increasingly cashless, paperless and debt dependent. And it seems to me that this is the path most other national economies are now treading.
A loyal reader of this column wrote to tell me that what I’ve written about the debt culture in America is gradually emerging even in Nigeria. Banks, he said, are now targeting people who have regular, fairly well-paying jobs and are offering such people loans and mortgages. It’s only a matter of time before credit cards will be introduced too—if that has not already happened.
When that happens, I only hope the government will strictly regulate the banks in the same way that lending institutions are regulated in the United States. Lending institutions here can’t charge just any interest rate; they have to operate within the limits predetermined by government regulation, which are usually reasonable and take into account the interest of the borrowers--well, to some extent.
Now, is this debt culture bad? You bet. But it also has many redeeming features, as I will show from my personal experiences shortly. And I bet that many Nigerians would gladly jump at the opportunities the debt culture offers.
But more than that, the global economy itself has been run on debt since at least the 19th century. Nigeria, like all countries in the world, is an indebted country. Our national infrastructure, our universities, etc are built with money borrowed from other nations or from international lending institutions. You can’t be thoroughly immersed in a global debt culture and be worried about its manifestation only in personal and national economies. That seems to me like a misdirected worry.
Apart from the nagging guilt that gnaws at me for being “indebted,” which is a holdover from my background, I have no bad experiences with credit cards. I am in absolute control of my spending habits and of my debt profile. And when I am ready to leave this country, I will simply repay all my debts and close my credit cards.
Thankfully, I don’t incur more debts than I can repay in a month, and the interests I pay are so small as to be almost unnoticeable. So I am not in danger of mortgaging anybody’s future!
When I relocated to Atlanta over a year ago, I found myself staying in a hotel for a longer period than I had anticipated because I had difficulties getting an apartment that was affordable and close to my school.(And hotels in Atlanta are incredibly pricey). After staying in a hotel for a month, I ran out of money.
And I have no family here. I was in real danger of starving to death because my salary would not be paid until the end of the month since I hadn’t done any work for the school yet. My saviors were my credit cards.
But my credit cards were to save me on an even bigger occasion. When I finally got an apartment that was decent, affordable and fairly close to my school, the management of the apartment complex had to run a “credit check” on me. Fortunately, they found that I had a “good credit history.” And so I didn’t have to pay any “security deposit” to get into my new apartment.
My Russian colleague was not as lucky. He had just come from Amsterdam, had never lived in America, had no credit card and therefore had no credit history. So all the apartment complexes required him to pay a hefty security deposit worth thousands of dollars before leasing an apartment to him.
He couldn’t afford it. And he was so disillusioned that he wanted to go back either to Russia to Amsterdam. Then we met.
I offered to let him stay in one of my rooms, and we shared the cost of the apartment. After one year of staying here, he wasted no time in “building his credit history,” as we say it here, and now lives in his own apartment. How did he do it? He applied for and got a credit card, then paid his debts and bills on time, etc.
The whole point of the credit check, as I said elsewhere, is to demonstrate that you have the capacity to pay your rent, your debt, etc without defaulting. If the data from the credit bureaus shows that you have never defaulted in the payment of your bills and your credit card debts, you inspire confidence in a prospective lender or an apartment complex owner, etc that you’re trustworthy enough to do business with.
Of course, this should not obscure the fact that this debt culture is naked capitalist acquisitiveness. Credit card companies and lenders make a hell of a lot of money from the interests they charge on credit cards and mortgages. They are not some altruistic, benevolent people who are concerned about you. But every cloud, as they say, has a silver lining.
It should be mentioned, too, that there is a curious outgrowth from this debt culture. There are many marginal businesses that now appeal to people who have been pushed to the fringes by the dominant debt culture. I have seen many commercials directed at people with “bad credit or no credit.”
So people actually have more choices than my two previous articles probably portrayed.