Credit Card Companies Preparing To Wage War On Their Cardholders

Posted by: David Kiley on May 19, 2009

The American Express card….I may soon come to leave home without it if rumblings of rule and policy practice changes are true.

This from a story in the NY Times today:

“There will be one-size-fits-all pricing, and as a result, you’ll see the industry will be more egalitarian in terms of its revenue base,” said David Robertson, publisher of the Nilson Report, which tracks the credit card business. People who routinely pay off their credit card balances have been enjoying the equivalent of a free ride, he said, because many have not had to pay an annual fee even as they collect points for air travel and other perks. “Despite all the terrible things that have been said, you’re making out like a bandit,” he said. “That’s a third of credit card customers, 50 million people who have gotten a great deal.”

So…The idea here is that card companies are going to try and soak the responsible good payers by providing fewer benefits and laying on more fees to make up the revenue shortfall from not being able to soak the bad payers as much as they had been. Though one wonders why these knuckleheads don’t just start acting like responsible banks and do a little actual underwriting. Like maybe…I don’t know…not giving an endless stream of $5,000 credit lines to college students and people who who make less than $35,000 a year.

And as for the quote above from Robertson about the “free ride.” Give me a break. AmEx, Visa and Mastercard get fee income from the merchants on every single transaction. Perhaps the credit card companies might consider developing their revenue model around that aspect of their business…after all, it’s not like the merchants don’t pass on their costs of dealing with the card companies on to their consumers. Consumers pay twice as it is for the convenience of using a credit card.

Free ride indeed.

Reader Comments

Ben

May 20, 2009 6:44 AM

Completely agree. Merchants are absolutely ripped off by the charges already and we pay for it in higher prices.

Scopulus

May 20, 2009 12:21 PM

Funny, as you have mentioned, that they forget they charge merchant a fee for each transaction.

Who were they they trying to kid, or is this the type of employee these organizations are employing, you know the ones that forget were they make their money. No wonder the banking sector is having a crisis.

Company Formation

May 22, 2009 2:08 AM

Free Ride? Are they out of their minds? There is no such thing as a free ride when you are involved with banks, that's like hoping for a horse to be-friend grass. Banks were the ones raking up hard cash from consumers who weren't even aware of the the surcharges they had to pay and as you mention that students were being given $5,000 credit line knowing that if they blow it (very likely) it will be years before they pay it off, those greedy lunatics! look at what happened when Obama injected cash to revive the financial instituitions, instead of utilizing the money they were planning to buy jets and paid of huge bonuses to their executives. I am planning to purchase a Company Formation package and well there goes the credit card again. Free Ride indeed!

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News, opinions, inflammatory meanderings and occasional ravings about the world of advertising, marketing and media. By marketing editor Burt Helm, Innovation Editor Helen Walters, and senior correspondent Michael Arndt.

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