November 5th, 2009
This article on MSN Money misses a bit in the title:
Banks punish perfect customers
The article is another one on how credit card companies are hitting otherwise conscientious users with annual fees. The users that are being targeted now are those who pay their bills on time and don’t carry a balance.
These are not perfect customers as far as the bank is concerned. They are close to the worst, actually: just one step above those customers that declare bankruptcy and discharge their debts. Convenience users are not very profitable for the credit card companies, and could well cost the companies money.
Who are the best customers? Customers that pay the minimum balance each month for years and years. Even better are ones that do so while going over their credit limit and occasionally are slightly late on a payment, triggering more fees. They’re the profitable ones for the banks. If it weren’t for the profitable customers, the credit card companies couldn’t afford to hold onto the unprofitable ones. But what’s happening now is that the CARD Act is clamping down on a number of these very profitable practices, and everyone suffers.
The tone of the article is interesting, in that it suggests that credit card companies exist to make the lives of responsible people easier. That’s just not true. They exist to make money. They don’t make money by letting people like me get three weeks’ use of their money, interest-free, and a rebate to boot. They tolerate people like me because I might fall on hard times, carry a balance, and then they’ll make money off of me. They’ve kept me around only because I’ll go elsewhere if they make life too difficult for me. (Perhaps they already want me to go elsewhere. I don’t really know.)
If most people are responsible with credit and pay their bills in full, then we’ll mostly be convenience users and will have no choice but to pay fees. But the convenience users are starting to pay fees now because banks are needing to look for sources of income, as it’s been made clear that credit card users shouldn’t have to face the full consequences of their misdeeds.
Posted in Commentary, Credit | 3 Comments »
