Credit card companies know how you spend, where you spend and what you spend it on. They know what times of the year you are looking for extra cash and situations where you might blow through your budget.
You give them that information every time you use your card.
Since Maria, Dave and I don't have cards, we make that information about us tougher to find.
Joe Nocera's 1990 book, "A Piece of The Action," is one of the greatest business books ever written. It is the history of personal finance and credit cards.
Nocera wrote about Andrew Kahr, who got Household Finance in the credit card business and was the founder of First Deposit Corporation (which became better known as Providian. )
Kahr had a knack for using mathematics and marketing techniques to find people who would never pay off 100 percent of their credit card balance.
His companies made a fortune, like all credit cards companies do.
It never ceases to amaze me how many people think they are "smarter than the credit card game." It reminds me of people who are trying to outfox casinos.
Christina Binkley's book about casino companies, "Winner Takes All," talked about how casinos like Harrah's used their "rewards card" system to track the gambling habits of their customers.
If a casino can track your spending habits, imagine what a credit card company can do.
Las Vegas was built on a lot of people who thought they were smarter than the odds-makers. I see the same mentality with credit card users.
People often defend their credit card use and say they "pay off the balance" or "make a killing in rewards points." I've had the same conversation with people who think they are beating the casinos by getting complimentary food, drinks and rooms.
I've never seen a profitable business give away more than it takes in. Casinos and credit cards companies are two of the most profitable businesses around.
Small town banking
I've always done my banking with small town bankers who I know. I had to look them in the eye and tell them what I was spending the money on.
It was often an uncomfortable but valuable experience. Sometimes bankers would talk me out of the loan or tell me I couldn't afford it.
An officer in a consumer loan company once told me that they focus on small towns and rural areas. People in small towns would do what it took to pay their loans, as they did not want to lose face with their neighbors.
You don't lose face if your "bank" is the South Dakota branch of a New York bank and the collectors are located in India. It makes it easier to take on more debt than you can handle.
Small town bankers taught me the skill of money management and discipline. None of them tried to tempt me with "cash back" offers. None of them tried to hit me for 24 percent or 36 percent in interest, either.
Most credit cards come from "too big to fail" banks. The same ones that we, the taxpayers, bailed out.
If you look at the list of the top credit card issuers and look at who got bailout money, they are usually the same names.
You may not see the bankers in person, but they know a lot of about you. Or they think they know a lot about you. The banking collapse and bailouts proved that the bank's didn't know us as well as they thought they did.
They only know how to sell us on their products. They do that extremely well.
Knowing a customer and knowing what touches his or her hot button are two separate issues.
The only way to keep the companies from acting like Big Brother is to not give them the information to start with.
That was a conclusion that Maria Bartiromo, Dave Ramsey and I came to some time ago.
Today is the day to cut up the cards. Today is the day to stop letting "too big to fail" banks hit you for outrageous interest and fees. Today is the day that you stop the card companies from tracking your spending and what restaurants you frequent.
Today is the day when you proclaim your freedom from credit card overlords.
Let me know when you do.
You can write to Don McNay at don@donmcnay.com.
