Credit Card Marketing Trend
http://pmrss.com/log/articles/344/1/Credit-Card-Marketing-Trend
Pulsar Marketing
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By Pulsar Marketing
Published on 08/20/2007
Is the latest credit card marketing trend bad news for affiliates but good news for consumers?
Credit Card Marketing Trend, or Tail Chase?
If you've been following news stories about the sub-prime credit market, then changes in the credit card marketing arena come as no shock. And the impact this will have on sub-prime credit card affiliate programs may cut deep into associate pockets.
This article is an opinion by Pulsar Marketing about sub-prime marketing.
The Situation and the Problem...
Situation: Bad credit consumers (and by-large they're well aware their credit is bad) are seeking credit cards that will offer them second chances and will help them rebuild their credit ratings.
Problem: Extending a line of credit to people who have a history of poor repayments (or complete default), is a high risk to credit card issuers. The way they offset the risk is to minimize their losses by spreading the cost across the masses of applicants. For example, by offering a $300 credit line and charging an initial fee of $150. For those who cannot cough up the $150, the amount is added to the card as a charge and the cardholder repays via monthly payments as if the fee was a purchase. By using a high fee, low credit limit format, issuers overcome losses by those who default.
Is this legit and fair? Getting a $300 credit line at a cost of $150.00 certainly doesn't sound fair, but who created the bad credit situation in the first place? Was it other, previous lenders and card issuers who caused people to develop bad credit by overcharging fees and high interest rates? Or was it the consumers themselves by ineffectively managing their finances? And are the sub-prime lenders further feeding off these poor people, or are they offering them a viable second chance (although expensive for consumers and risky for the issuers) to rebuild their credit?
Who's to blame? When there's no clear culprit to send the hounds chasing after, we (consumers, government and lenders) typically start chasing our own tails. First, consumers howl their complaints, which draws the attention of government watch-dogs who either create new legislation or otherwise coerce lenders to police their own policies. Either way, lenders tighten their policies, terms and conditions. Meanwhile, a large segment (bad credit people) are left with little; or no, options for credit because lenders are too afraid of lawsuits and/or government regulation and are not about to accept more risk than they have to. Eventually, however, we come full circle after a bit of tail chasing. Consumers once again become over-eager to obtain credit; government watch-dogs heel, and lenders relax their policies, terms and conditions in order to compete against the other lenders who are doing likewise.
What's really broke? Lack of understanding of the terms seems to be a big issue. Many consumers who complain about the credit card (and loan) terms they were stuck with, claim that they did not fully understand those terms. So... were creditors trying to conceal those terms or to mislead consumers? Or are consumers too lazy to read; or too ignorant to understand, the terms?
Is credit a priviledge or a right? If credit is a priviledge and the terms are revealed, then let the buyer (borrower) be ware. If credit is a right, then legislatures should consider standardizing all credit applications with one common application form for each type of credit and for every borrower regardless of individual credit history.
This article is an opinion by Pulsar Marketing about sub-prime marketing.
The Situation and the Problem...
Situation: Bad credit consumers (and by-large they're well aware their credit is bad) are seeking credit cards that will offer them second chances and will help them rebuild their credit ratings.
Problem: Extending a line of credit to people who have a history of poor repayments (or complete default), is a high risk to credit card issuers. The way they offset the risk is to minimize their losses by spreading the cost across the masses of applicants. For example, by offering a $300 credit line and charging an initial fee of $150. For those who cannot cough up the $150, the amount is added to the card as a charge and the cardholder repays via monthly payments as if the fee was a purchase. By using a high fee, low credit limit format, issuers overcome losses by those who default.
Is this legit and fair? Getting a $300 credit line at a cost of $150.00 certainly doesn't sound fair, but who created the bad credit situation in the first place? Was it other, previous lenders and card issuers who caused people to develop bad credit by overcharging fees and high interest rates? Or was it the consumers themselves by ineffectively managing their finances? And are the sub-prime lenders further feeding off these poor people, or are they offering them a viable second chance (although expensive for consumers and risky for the issuers) to rebuild their credit?
Who's to blame? When there's no clear culprit to send the hounds chasing after, we (consumers, government and lenders) typically start chasing our own tails. First, consumers howl their complaints, which draws the attention of government watch-dogs who either create new legislation or otherwise coerce lenders to police their own policies. Either way, lenders tighten their policies, terms and conditions. Meanwhile, a large segment (bad credit people) are left with little; or no, options for credit because lenders are too afraid of lawsuits and/or government regulation and are not about to accept more risk than they have to. Eventually, however, we come full circle after a bit of tail chasing. Consumers once again become over-eager to obtain credit; government watch-dogs heel, and lenders relax their policies, terms and conditions in order to compete against the other lenders who are doing likewise.
What's really broke? Lack of understanding of the terms seems to be a big issue. Many consumers who complain about the credit card (and loan) terms they were stuck with, claim that they did not fully understand those terms. So... were creditors trying to conceal those terms or to mislead consumers? Or are consumers too lazy to read; or too ignorant to understand, the terms?
Is credit a priviledge or a right? If credit is a priviledge and the terms are revealed, then let the buyer (borrower) be ware. If credit is a right, then legislatures should consider standardizing all credit applications with one common application form for each type of credit and for every borrower regardless of individual credit history.