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Advertising Age posted a news story last week describing a possible end to credit card companies ignoring “deadbeats.” In this case, though, the people they call deadbeats are the ones that pay their bills in full each month.
The problem? These so called deadbeats never incur charges. Instead, they tend to earn tons of rewards and cost the card issuers money.
(Around here, we tend to call these people card hackers. And, frankly, it is more fun and often more rewarding than couponing. Though it never hurts to combine both.)
The recession was at least in part caused by thousands of people receiving credit that they weren’t actually qualified for; this included credit cards. President Obama’s new credit card law, which takes effect in July of 2010, promises to change the way credit card companies treat customers and who they lend to. The new law may also make these “deadbeats” a more attractive offer.
Ad spending, already down 6% from 2007, is expected to go down even further, with a definite shift in who credit card companies will target.
The industry will for sure shrink, as it has already begun. With fewer people applying for and receiving credit cards, companies will turn to individuals that reliably pay their bills.
“Revolvers,” or customers who carry a balance, used to be the ideal customer for credit card companies. These same customers now cannot afford to pay their high bills, letting the charge-off rate reach double-digit levels. The new credit card law will freeze interest rates and the fees on cards that have been canceled, serving as a double blow to credit card companies.
Credit card companies will begin seeking customers that will charge thousands each month and pay their balance in full as they will still receive the 2% or so fee they charge merchants. This will be a much better deal that what’s currently on the plate.
You can read more about the article at Adage.com.
“Credit-card Issuers to Market to ‘Deadbeats'”