Consumers Take Advantage of Best Deals
Many of the larger credit card companies have been taking flak recently for some of the ridiculous interest rates and tricks employed to squeeze every last dollar out of their customers. The internet has given credit card companies a new challenge to deal with as people now have close to perfect knowledge of the market and can all too easily and quickly find the best deal, you no longer have to have the business acumen of Peter Sutherland to stay ahead. Faced with such a competitive market place credit card companies began offering 0% on balance transfers in a bid to attract more business ” however what this led to was the emergence of much savvier consumers who simply move their debt from credit card to credit card to avoid paying any charges on the balance.
One figure that has been touted is that 50 million consumers fall into this category and are getting out of having to be lumbered with any monthly charges. As well as this a lot of consumers are also earning frequent flyer miles and other such incentives designed to get people to part with their money. Whilst some people may be tempted to feel a bit bad for the financial institutions we must 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. There are also other hidden charges such as foreign transaction fees which can often be quite extortionate.
The cost of hidden credit card charges are made a bit less painful by the cash back reward schemes many of the credit card companies offer their customers. All of these reward schemes mean you are encouraged to perhaps part with 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. Financial institutions will have to tread very carefully if they are to begin cutting back on such incentives in an effort to make bigger profits. This is because people will simply vote with their money and move to a credit card company which still does offer a reward scheme ” the credit card companies would have to put up a single to front for them to successfully be able to drive up profits further. 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.
