Sunday, October 3, 2010

Credit Card Companies STILL Encouraging Consumers to Overspend

My interior design business accepts credit card payments, so periodically I get these "Change in Merchant Processing Terms" notices from the bank telling me about increased processing rates, mandatory procedural changes to safeguard clients' account information, etc.  I recently received one of these notices advising me that, instead of declining credit card sales when the consumer has insufficient available credit, from now on, the credit card machine is going to partially approve the sale -- allowing the consumer to max out that credit card -- and prompt the sales person to request a second payment form to complete the sale.

Let's think about that for a moment.  At first glance, what's the big deal?  If the customer's card was declined outright, they were always able to request to have a lesser amount charged to the card and split the sale between two methods of tender if they wanted to.  When I worked in retail part-time as a student, I saw that happen quite a bit.  Some customers would ask ahead of time, before you ran the card; "Please put $800 on this card and the rest on that one."  However, I also saw that having one's credit card declined outright at the point-of-sale, especially when the store is busy and there are other shoppers in line behind you, can be a rock-bottom slap-in-the-face wakeup call to a consumer whose spending has gone out of control.  I like to think that some of those maxed-out shoppers went home and took a cold, hard look at their financial situation and perhaps began the hard work of digging themselves out.  I don't know what the exact statistics are, but I'd guess that an awful lot of consumers walked away without purchasing when their credit card was declined, or at least decided to purchase fewer items to bring down their total. Now that the credit card companies will be issuing partial approvals, cashiers will be saying "Your card went through for $xxx.  How would you like to pay the remaining balance?" instead of "I'm sorry sir/ma'am, but your card was declined."  It's a subtle difference, but the only reason I can think of why the credit card companies would want to do this is to encourage consumers to go deeper and deeper into debt.  What do you think?

2 comments:

Fred and/or Marlies said...

Of course they want you to be in debt. That's their business. How else can they pay the types of bonuses they claim to earn? It's the same with mortgages which never get paid off.

Janice the Manice said...

UGH. Yeachk!
Now that the credit card companies are unable to raise your interest rate astronomically due to a late payment (or whatever) they need to come up with new ideas to gouge us all.
UGH. Yeachk!

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