Wall Street Bankrupts Us With Casino Tools

Casinos would go broke if people acted completely reasonably with money.  Instead, players go bankrupt and the house always wins.  Banks have learned to play the same games.

Banks are gradually turning the consumer financial world into a casino.  I don’t mean just the way they turn every loan into a chip in a huge game of chance like the one that crushed the real estate market last decade.  Although that doesn’t help.

No, what I mean is that the way people think about and use money is becoming more casino-like and the banks are the driving force.

We already know that using cash prevents us from spending too much money.  And conversely that using credit cards tends to cause your debt to accumulate.  It is a simple reality of human psychology that using any sort of cash substitute makes us less sensitive to how expensive things are and less sensitive to how much we are spending.  Like poker chips in a casino.

Casinos long ago realized that treating customers like royalty can loosen their pocketbooks.  So being served grandly while in the hotel, given free food and liquor while in the casino, and so on will make it more appealing to stay and play.  Similarly, the “exclusive” gold card has given way to the platinum, titanium, black, diamond and, someday, uranium cards for “special” customers with concierge services.  All designed to make you feel unique in all the world — so long as you flash that card often!

Retailers recognize this and encourage it.  Like casinos, it’s harder to actually use cash to buy things in many situations.  From the simple gas pump to paying for a meal to buying a shirt at the store, it’s often easier to pay with plastic — with many retailers offering bigger discounts if you’ll sign up for their store branded card on the spot.  And the credit industry even promotes this excessive spending by marketing the idea that you should be embarrassed if yuo take time to pay with actual cash.  How un-hip!

Granted, banks have promoted debit cards as way to use your cash instead of credit safely.  But of course they profit from fees the merchant pays.  And they hope you will go over your limit and borrow money from an overdraft line of credit — effectively making your debit card into a really bad credit card.

The passion for plastic has even gotten to the point where even finance guru Suze Orman is promoting a stored value card.  If you haven’t heard, a stored value card is your cash…on a piece of plastic…and, for a fee, you can use it!

Heck, banks have even turned the old fashioned banker’s gift for new customers on its head to emulate casinos.  In the old days, a bank would give a toaster or other gift to new depositors.  And a few banks still do give out some sort of gift for new deposits (often frequent flier miles or the like), although most banks treat depositors as an expense and load fees onto those accounts these days.  But they almost all still give away the perks for one thing — opening credit card accounts and spending money.  A large proportion of credit cards these days comes with flier miles  or other perks driven entirely by greater spending on the cards.

In other words, banks now punish — with fees — you for saving money.  But they’ll reward you handsomely for spending it in the right way.  In the hopes you’ll spend even more and ultimately spend money you don’t have right now.  That is, get into debt.  And become like the addicted gambler, unable to leave the casino.  Because, in the end, the house always wins.

As a bankruptcy lawyer with a business to run, marketing my services is easier with the banks pushing more people towards bankruptcy all the time.  I’d be just as happy to not have the help though.