I am constantly amazed at the creativity of companies that offer credit cards. They use a wide diversity of tactics to appeal to people and convince them to either start using a credit card or use a credit card more than they actually would. Why? The more you use a card, the more likely you are to carry a balance on the card, and the more likely it is that the credit card company will make a mint off of you. Here are seven of my favorite tactics that credit card companies use to cloud the issue.
Appealing to your social conscience. This is my current favorite tactic, with my favorite example being the American Express Red card. Available in the UK, the American Express Red card donates 1% of your spending to Global Fund, a charity created to fight against AIDS. Even better: if you spend more than 4,000 pounds on the card, that percentage goes up to 1.25%. Why, the more you spend, the more you’re helping the world! Right? Right? Many local banks mimic the same deal: here’s a local credit card from the Albina Community Bank of Portland, Oregon, that “gives back” 1% of all spending on the card to local charities. Such thoughts make it easier for many to use the card, as they think, “If I use my plastic, Timmy’s playground will be that much better…” then the bill comes, the minimum payment is made, and the credit card issuer cleans up on the interest.
Advertising some spectacular “benefits” up front. When a credit card offer comes in the mail, the 0.0% number is the one that sticks in the head. “It’s free money!” some will think. Well, that 0.0% is often only for balance transfers and only for a short time – aside from that, the interest is well in the teens. Even better, the companies couple this with user agreements that consist of dozens of pages of small text, something most people won’t bother to read. Which is no big deal, really, considering that part of each of these agreements is a statement that the card issuer can change the rules at will.
Mixing with your desire to spend time with your family. Remember that old family board game, The Game of Life? I certainly do, but I don’t remember the newest addition to the game: Visa cards. That’s right – a classic board game has been “updated” to brand with the Visa logo. Whip out your credit cards so you can go on vacation, kids!
Distributing a lot of “points” that don’t provide strong merchandise choices. Many credit cards, including the well-promoted Chase Freedom card, offer a program that affords you points, which you can then exchange for a wide variety of items. Well, more like “wide variety” – many points programs are rather limited on the items you can get. “Redeem your points for gift cards/certificates, hotel stays, car rentals, travel on any airline with no blackout dates, or merchandise” says the offer, but the selection is often very arbitrary or the price of the item costs such an exorbitant amount of points that you had to have burnt through many, many thousands of dollars on your card to get it.
Conspiring with youth culture. What seven year old girl wouldn’t want a Hello Kitty Platinum Visa card (yes, I realize that Hello Kitty has something of a wider market than that). Even the executives at Sanrio, the company offering the card, admit that the card is targeting pre-teen girls. Hopefully, parents out there have some sense about allowing an eleven year old girl to have a credit card, but with the average American household with one or more credit cards holding down roughly $9K in credit card debt, I worry about it.
Trying to tap into your spirituality and politics. The Enlightenment Visa is a points-based credit card that directly targets … well, environmentalists and Buddhists. The rewards catalog for this card features some impressively overpriced and focuses entirely on tchotchkes of direct appeal to what I often describe as the SUV environmentalist crowd or, perhaps more commonly, metrospiritualists. I have no problem with someone who authentically subscribes to such a spiritual worldview, but it seems to me that such a worldview shouldn’t be expressed through use of a Visa card. Yet it apparently has appeal to people seeking out a “socially conscious” credit card.
Leveraging your status as a fan of an entertainer or sports team. Such cards are designed to draw in “super fans” who must have everything with their favorite entertainer or sports logo on it. Take the KISS credit card, with a nice 32.99% interest rate the first time you are late on a payment, or the NFL Extra Points card which can include your favorite team’s logo, a 1% points program for overpriced NFL merchandise, and, if you dig into the fine print, a 29.99% APR if you’re a day late on a payment. I would brush this off if I hadn’t seen both of them in use in the past month or so.
What’s the best thing you can do as a consumer to avoid such rip offs? First, ignore the picture on the card or the “identity” of the card. A credit card is a tool, not a means of expression – would you use a hammer made out of balsa wood if it was emblazoned with Hello Kitty or the logo of your favorite NFL team? Next, don’t encourage your children to use credit cards when they’re young. Keep everything in tangible cash so that they really understand the concept of money. Credit cards add an abstraction layer that makes it hard for many adults, let alone children.