01 Aug Changing landscape in debtor/creditor relationships
The “good customer” for the credit card companies is one that doesn’t pay his bills. Hasn’t the world changed? Issuers of revolving credit make more money when the borrower makes the minimum payment and is in debt for the foreseeable future.
The director of the documentary Maxed Output it this way in Kiplinger’s:
lenders discovered years ago that they can make more money by getting people to spend rather than save. It used to be that a preferred customer was someone who paid bills on time and paid down debt. Now a preferred customer is someone who floats debt, pays interest and pays fees.
Which explains in part the clients I see with 2, 3, 4 or even 5 credit cards from the same lender, each at its limit. As long as the consumer was willing to keep making the minimum payments and borrowing more, the issuer saw no reason to stop.
You begin to wonder if the amount loaned isn’t just a loss leader to hook the card holder for the fees and interest that follows.
See my earlier article on the choice between paying credit card minimum and saving for retirement.
Cathy Moran, Esq.
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