For many credit card companies, customer satisfaction ranks right up there with getting a root canal. Maybe they haven't heard, but customer satisfaction, not self-gratification, is the key to running a successful business. What I'm referring to is the credit card industry's latest money-making scheme which leaves consumers with the responsibility of footing the bill.
In response to the government's attempt to crack down on high interest rates charged by credit card issuers as a result of the global economic recession, credit card companies have found a new way to rake in more dough before the proposed government sanctions come into effect next February. Beginning in 2010, some cardholders can expect annual fees for not charging a specific amount to their cards, inactivity fees for not using their cards during a specific time period, and annual fees, ranging from $29-$99, from some card issuers who do not currently charge an annual fee. This, on top of high interest rates some customers are currently being charged, and an unemployment rate of 9.8%, makes for a very risky move on the part of the credit card industry. Cardholders will no doubt be forced to close their accounts, leaving banks searching again for ways to increase profits and the credit card sector on its last leg.
And while it's true that banks need to get back on their feet after suffering losses during the economic recession, further angering already-frustrated customers is not the way to do it. One way to approach this task would be to cut advertising costs. Last year, banks spent a little more than $218,000 on TV advertising of credit card services between July and August. Companies such as Hasbro, Daimler, and DuPont have recently reported profit increases due to cutting costs on advertising, inventory and research. Banks may also want to try investing in stocks, bonds and commodities, a strategy that helped boost profits for JPMorgan Chase and Goldman Sachs. And let's not forget about cutting those hefty CEO compensation packages that helped push banks further into the red.
While it is not yet clear if the credit card industry will collapse entirely, what is clear is that they will do just about anything to continue bilking consumers out of huge amounts of money. Groups led by the American Bankers Association and the Financial Services Roundtable have urged Congress to abandon efforts to regulate their unethical, and hopefully soon-to-be illegal, practices, citing that creation of a new regulator would cut consumer access to credit. But the fact of the matter is, it is the involvement of those in the financial sector in shady and illegitimate business practices that restrict consumer access to credit, not government legislation preventing those practices.
Originally posted on RUSE the.magazine