Paying Less Interest
Credit card companies have come under fire recently for some of the extortionate interest rates and tricks used to get every last penny 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 much better 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 stay ahead. Faced with such a competitive market place credit card companies began offering 0% on balance transfers in an effort to attract more business ” however what this led to was the emergence of much more clued up customers who simply move their debt 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 getting out of having to incur any charges. On top of that many people are also earning frequent flyer miles and other such incentives designed to get them to spend more money. Whilst a few people could possibly be tempted to feel a bit bad for the financial institutions we should 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. As well as this theres other 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 a lot of the credit card companies offer their customers. Such reward schemes mean you are encouraged 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 very carefully if they are to begin cutting back on such reward schemes in a bid to make bigger profits. This is because customers will simply vote with their feet and shift to a credit card company which still does offer a reward scheme ” the financial institutions would have to put up a united to front for them to achieve their desired outcome. 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.
