Please enjoy the following guest post.
The business and culture of pre-paid (“stored value”) debit or cash cards continues its rapid ascent to realms far beyond the original debit cards that were tied to bank checking accounts. But not without controversy. In October (2011), the BaltimoreSun reported that Marylanders were experiencing “anxiety and distrust over the coming of smart meters,” computerized monitoring of kilowatt usage in homes and businesses. Some electricity customers – those who initiate service with poor credit and no deposits – will need to pay for their electricity in advance, and when the account runs dry the shut-off could be immediate.
The analogy the electric company uses is that it is similar to pay-as-you-go cell phones. These are largely used by individuals who either do not wish to maintain long-term contracts – perhaps but not necessarily for nefarious reasons – or because their credit scores preclude having a multi-year relationship with the carrier.
The Sun writer cites others who say electricity and cell phones fall into different moral categories.
“Electricity isn’t a cell phone,” goes the argument. The article cites a Fort Worth, Texas power company that began offering this service this fall. While it does work similarly to cell phone pay-go systems, additional benefits are touted as well: advanced usage-monitoring technologies enable energy consumers more information on how to reduce their usage and, consequently, their costs. But the main attraction likely is that security deposits and minimum credit scores are not required.
The Sun writer notes, somewhat cynically, that the service is not unlike “the convenience and affordability of payday lenders,” providers of cash advances on paychecks. These are typically used by individuals who are caught short of money at moments when they absolutely need cash, such as for car repairs and medications not covered by insurance deductibles. The fast payday loan industry itself has grown with technology, as most are now offered online with a simple, five-minute application process.
The libertarian, free-market argument on each of these is simple: No consumer choices are being eliminated. Product offerings are simply being broadened. These new ways of paying for services – electricity, cell phones and short-term cash loans – effectively bring these things to individuals who might not otherwise be able to access them at all.