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.