This was part of a mailing full of blank checks that I got from credit card purveyor Capital One on Saturday. By my reckoning, only one of these proposed uses of credit (“Build a deck”) is a genuine capital expenditure. Four more (“Have your house repainted,” “Buy a new TV,” “Join a gym,” and maybe “Update your wardrobe”) have some lasting value and thus aren’t crazy. The rest are things that are entirely inappropriate to go into debt for: “Put some extra cash in your pocket,” “Host a party,” “Put a down payment on that convertible you’ve been eyeing,” “Get courtside seats,” “Take a vacation (you deserve it!)”
What Capital One is doing here is equivalent to Anheuser-Busch sending out mailings encouraging customers to drink till they puke. Funny thing, though: Anheuser-Busch doesn’t send out mailings (or run ads) like that! If they did, they’d get into all sorts of trouble, both legally and in the court of public opinion.
Which makes me wonder. Why exactly is it that we don’t subject financial advertising to the same level of scrutiny we give to ads for alcoholic beverages? It’s not like the product is any less dangerous.
Update: In the comments and on his blog, Mike Moffatt makes the good point that the ads for state-sponsored lotteries are if anything even worse in this regard. Also, economists are beginning to look closely at what works and what doesn’t in our regulation of alcoholic beverages. Duke’s Phil Cook (co-author of the definitive economic examination of state lotteries) has a new book on the subject, Paying the Tab: The Costs and Benefits of Alcohol Control, an excerpt from which can be read in the January 2008 issue of the Milken Institute Review (sign-in required). There might be lessons there for how we ought to deal with overeager debt salesmen.