New Tactics
Credit card companies have come under fire recently for some of the ridiculous interest rates and tricks used to squeeze every last pound out of their customers. The rise of the world wide web has given credit card companies a new challenge to deal with as customers now have close to perfect knowledge of the market and can very easily and quickly find a better deal, you no longer need to have the business know how of Peter Sutherland to avoid such pitfalls. In the face of such fierce competition credit card companies began offering 0% on balance transfers in an effort to get more business ” however what this led to was the emergence of much savvier consumers who simply keep on moving the balance from different credit card companies to avoid paying any charges on the balance.
It has been claimed that upwards of 50 million consumers fit into this category and are avoiding having to pay any interest. On top of that a lot of consumers are also enjoying frequent flyer miles and other similar incentives designed to get them to spend more money. Whilst a few people could possibly be tempted to feel sorry for the banks we must not overlook the fact that they are still making a huge amount of money. In fact every purchase a consumer makes incurs an interchange fee which goes straight into the merchant banks coffers. There are also a whole host of hidden charges such as foreign transaction fees which can often be quite extortionate.
The pain of hidden credit card charges is made a bit less painful by the cash back reward schemes many of the credit card companies offer their customers. Such incentives mean you are persuaded to perhaps spend more on your credit card than you normally would, but at the same time allow you to earn some more interest on your money in the bank. Credit card companies will have to move extremely carefully if they are to begin reigning in such incentives in a bid to make bigger profits. This is because people will simply vote with their feet and shift to a credit card company which still does offer an incentive ” the financial institutions would have to put up a united to front for them to successfully be able to drive up profits further. Such a scenario can loosely be modeled on game theory, and luckily for the consumer means that the credit card companies are less likely to make any bold moves.
