Friday, February 15, 2013

Credit Card Loans: To pitch or to switch?

A few months ago, I was surprised to find two credit card applications addressed to my children who are minors. You would think that after the credit fallout of 2008, the industry would have learned a lesson or two about marketing to risky consumers. At the very least, you would expect them to be somewhat more vigilant about the applicants they attract.

When the letters first arrived, we had just opened two minor accounts for the children to teach them budgeting. Of course, I shrugged off the incident as an oversight although my childrens' ages and net asset worth should have been obvious. Who wants to believe that credit companies are still preying on the naive and vulnerable after a major credit crisis?

Then a neighbor enlightened me with her own recent experience. She called the credit card company to make changes to her payment information. Somewhere along the process, she mentioned she was in the middle of a divorce. The representative immediately asked her if she would like to transfer her balance and take advantage of the low interest rate and cash advances. Was this an attempt to prey on a customer or a sincere moment to advise one?

The reality is that these credit card loans come with hefty interest rates. This may be common sense to many consumers, including my neighbor. But when you're facing uncertainty and are consumed by potential financial woes, chances are senses are shadowed by the desperate need to pay your bills. Plus, a consumer going through a life-changing event such as divorce usually sounds off the money-trouble alarms to many reasonable folks. Why pitch higher interest rates to a potentially risky customer? Sounds to me like these credit card companies have not learned a thing.

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