On Being A “Bad” Credit Card Customer
Well I just got informed that I am a “bad” customer by my Chase issued Hess Visa Rewards Card. What did I do wrong?
Paid my bill every month on time… never late… but… Oh!… I see the problem!! I don’t carry a balance so they don’t get to bill me 12.24% interest and they were having to rebate me too much money per the terms of the card.
Original terms were: 5% rebate on all purchases including Fuel at any Hess Station and 1% on all other purchases.
Rebate applies as a credit every month against the outstanding balance thus reducing my bill.
New Terms to go into effect April 1st (April Fools Day… How Appropriate can you get?):
3% rebate on all purchases at a Hess Station including fuel… but only on the first $400 spent.
1% on all other non-Hess purchases except those at places that sell Fuel that is not Hess. Means if I’m low on gas and no Hess nearby I can’t fill up at Exxon and get at least 1% back instead I get nothing… applies to all Non-Gas purchases from any place that sells gas as well so don’t think you can use it at Wal-Mart to get 1% back… they sell gas too.
Here’s where it gets Down and Nasty… straight from the Mice Type in the Rules and Regs.
1. Rebate will accumulate instead of being applied to my account each month.
2. Rebate will be applied as a Statement Credit only when it reaches $25 and fractions over $25 will carry forward.
3. Rebates will be applied ONLY to “Hess Net Purchases” and I MUST have at least $25 of “Hess Net Purchases” in order to receive the Statement Credit.
4. Rebates Expire after 12 months.
Well since I rarely put $25 a month of gas in the bike and don’t usually buy things in the convenience store (Pay At The Pump Anyone? A stupid idea that cut store traffic immensely since you don’t have to go inside to pay but that’s another post and I’m not channeling my “Inner Businessman” here.) I probably won’t ever get the rebate now.
Probably time to go find another Rewards type card… Carnivals “Sea Miles” good for cruise redemptions might be on order.
This is interesting, Roland. I heard a story this afternoon on NPR that AMEX is paying customers $300 to pay off their balances and close their accounts. The commentator made a good point. Either these are customers who have the money to pay, or they are customers who can’t pay their balances. I think it’s probably the first group. And it doesn’t makes sense that a “good” customer is one who doesn’t pay their bill.
Credit cards are an extremely low margin business, and Chase is a leader in the market. They can only earn fees by yearly dues, interest, and interchange when the card is used (what they charge the businesses who accept the cards per transaction, and you can bet a large company like a Hess has tiny interchange fees). So yes, they are losing money on people like you and are re-writing terms to make it better for the Bank. There’s a reason Chase is the only 1 of the big 3 banks without 1 foot in the grave…sound business practices. You should find a better rewards card, but Citi did similar things with miles on my AA card. And if you close the acct…ding…FICO score down.
Sorry… forgot to say great post – can’t wait to read your next one!
The current economy is a mess everybody knows it. What is amazing is how some people continue their daily life as if nothing changed and one such behavior is their attitude to their credit score. Foreclosures and just not paying laons is not a solution. Until Americans become more responsible for their debts we can not get out of the current mess. It is about time Americans educate themselves about finances and debt. Just taking debts on credit cards and home loans is not the way to go unless you understand what you are doing and face it most of us just do not. Here is a good resource to read about credit http://www.badcreditloansgenie.com Education is key after all you would not try to fix your television set without studying how to do it first but you take a mortgage without understanding the basics behind debt.
Rob:
I will have to beg to differ on the idea that Credit Cards are a “Low Margin” business.
When I first got out of college I went to work for Sun Bank (now Suntrust) in the credit card division.
At the time:
1/ Sun Bank had 200,000 Card Holders.
2/ 40% of all card holders carried No Balance (Paid in Full every month).
3/ Interest was capped at 18% (this was before banks won the Supreme Court case that let them charge anything they want).
4/ There was NO Annual Fee.
5/ No such thing as POS (point of sale terminals) it was still the days of cardboard copies that we had to input manually. POS terminals cut the cost of processing transactions by over 10,000%.
6/ The ENTIRE credit card division including management and collections had barely 200 employees and 1/3 of one building.
7/ The rest of the bank had 6,000 employees and hundreds of millions in buildings and equipment.
YET…with all that…Only 60% of cardholders carrying balances, Interest Rate Cap, No Annual Fees, Manual inputing of transactions, Small staff and minimal Equipment requirements compared to the rest of the enterprise, the Credit Card Division accounted for 25%…Yes 25%!!! of the banks Total After Tax Income.
Credit Cards are the most lucrative thing a bank can get into…where else can you take in money into a Certificate of Deposit and pay 2% and loan it for 25%????
Banks aren’t making loans but they are still pushing Pre-Approved Credit Cards..its where the Profits are.
Roland,
I just had the exact same thing happen to me!
I guess being a responsible customer isn’t valued anymore…
and we wonder why the big banks are in the mess they’re in!
FrugalZen:
Respectfully disagree. 25% of a bank’s net income does not equal high margins. Could be high revenues concentrated in 1 line of business, which is risky.
I’ve worked in banking for 12 years, and currently do, in Product Management, and because of that experience, I know it is currently extremely low margin. Credit cards are only lucrative if you have economies of scale, like Chase, Amex, etc. Back in the day…I can’t speak to and you could be right. But today, with expenses getting higher (the bank’s internal fees for keeping accts open, rendering statements, loss reserves, new system development, marketing costs), the margin between these expenses and revenues (interest, balance transfer fees…but remember if people pay their balance in full, no interest, and if they carry a balance and are being charged interest, frequently, they make minimum payments anyway, so real revenue is lower than you think.
Rob:
Margins may be slimmer than when I was in banking especially due to the higher marketing costs they now incur but I still contend that they are the most lucrative line of income the banks have.
If you carry a balance and only make minimum payments the bulk of the payment is interest…or income to the bank…not to mention all the additional fees levied today.
If it wasn’t I still wouldn’t be getting all sorts of pre-approved card mailings and balance transfer offers from all my card issuers while at the same time the same banks are barely writing commercial and personal loans and making the customers jump through flaming hoops.
I think if you average out the interest rates charged from the best to the extortionary you will find that the spread is still much greater than that of regular loans hence the constant push to increase the number of outstanding cards and card balances.
~ Roland
P.S. It’s nice to have someone to get into a discussion about a post with..}:~D