Confession of a Credit Card Deadbeat

The roiling economy has uncomfortably squeezed the profits of various huge financial mega-corporations.  As the bottom-of-the-barrel customers are no longer able to honor their obligations, the fatty underbelly of fees and interest which the poorest consumers have struggled to pay is suddenly looking a little lean.  To make back their profits, the credit card companies are looking to eliminate the cash-back and frequent flier miles, reduce or rescind interest grace periods, and reinstate annual fees.

There’s no way this could backfire.

An amusingly twisted word in the credit card parlance is “deadbeats”.  Counter-intuitively, these companies use that term to describe their very best customers.  Do you pay your card off in full every month?  Do you rarely, if ever, accrue interest or late fees?  Do you regularly cash in your frequent flier miles and cash-back bonus?  Yes?  Well, since you don’t make much money for them, they don’t like you.  They tolerate you, but you’re gaming the system, getting a free ride.  You’re a deadbeat.

It’s nice to know what they really think of you.

Don’t weep, though.  They still make plenty of money from customers like me.  Every time we use our cards, the merchant is charged hefty fees for privilege of accepting our card of choice.  We don’t pay that directly, but we pay it indirectly through higher prices in restaurants, shops, and online.

But it’s not enough, so they’re coming after the good customers.  Ironically, they’re coming after the customers who need them least. I admit it: I am a credit card deadbeat.  And if I suddenly have to pay an annual fee or lose my grace period, what incentive do I have just to not carry cash?  I will happily abandon the credit card companies, tossing their aggressive advertising, obnoxious phone calls, and invasive behavior tracking right along with their annual fees and interest rates.  And good riddance!

And, assuming I’m not the only one happy to return to legal tender, then the credit card companies are sowing the seeds of their own doom.  As their best customers jump ship, their balance sheets will be left a ghetto of poor credit customers.  As losses mount from those who can no longer pay, the ratio of good assets to bad will finally topple the once-mighty giants of consumer finance.

Stack of Credit Cards modified from the original Too Much Credit by Andres Rueda under a CC Attribution 2.0 Generic license.