Credit Card Industry Shifts Strategy, Goes After Good Payers
Marketplace, Tuesday, February 23, 2010 10:38 AM
The credit card industry used to love the consumer who kept on buying and buying and paying just the minimum due at the end of the month. There was a lot of profit in the interest and late-payment charges before it lost about $150 billion from such free spenders once the recession hit and they defaulted on their loans. The industry's new target, Stacey Vanek-Smith reports, are people who pay off their balances every month but use their cards a lot in order to rack up rewards points.
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It's simple economics based on interchange fees -- the percentage that merchants pay card companies every time consumers swipe their cards. The result is that rewards programs are getting more enticing -- from cash-back deals to triple-point bonuses -- as credit card companies vie for consumers.
The strategy is not simply short-term. "Banks are hoping that when consumer confidence turns around, they'll be coming around for a car loan, [or to] buy a new house," says Robert Manning, author of Credit Card Nation.
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