20 July 2005

Now Look What The Banks Are Up To

Personally, I find it shocking. I'm almost inclined to use the word "unethical" but I don't want to be sued. (That means I never used the word. Nyeah nyeah nyeah nyeah nyeah.)

July 20, 2005
Get rewarded - for not paying up in full
Some banks are dangling goodies at customers who roll over credit balances

By Kelvin Wong

CUSTOMERS who are inclined to pay off all or most part of their outstanding credit each month are being encouraged by some banks to stay firmly in the red.

Citibank is dangling prizes in front of customers who pay only the minimum on their balances while United Overseas Bank (UOB) is giving cash to clients who do not pay up in full.

Customers who take up the offers will have more money in their wallets during the month but the usual interest charges will still apply on their outstanding credit.

The strategy has likely been prompted by the growing number of clued-up customers only too aware of the ills of borrowing.

Credit bureau figures showed that 60 per cent of card holders paid off their balances in full in March and less than 2 per cent failed to meet the minimum payment.

Industry watchers said the new promotions were an attempt by banks to increase their interest income.

Citibank is offering its Ready Credit customers the chance to win an O2xda II Mini PDA mobile phone, which retails for about $1,200 without a subscription plan.

The catch? They must pay just the minimum amount indicated on their monthly bill and roll over their credit balances, a practice known in the industry as revolving.

Paying up in full, or indeed, just a dollar more than the minimum amount, will disqualify the bank's credit line users from the draw."
Mr Wang urges all his readers to pay their credit card bills in full each month by GIRO. Don't let the banks make a sucker out of you. They already make good money out of the merchants where you use your credit card (for every dollar you pay via credit card to the merchant, your bank deducts a few cents and keeps it for itself).

The Common Spotted Pleco, also known as the sucker.
A favourite among aquarium hobbyists, and one of Citibank's top clients.

2 comments:

Norman said...

They're crazy. It seems that by doing so they are inviting trouble by increasing the number of people likely to default on the debt.

Mr Wang Says So said...

They're not crazy. That's because people don't overspend and then immediately default.

People overspend, struggle, pay minimum sum, pay interest, struggle, overspend, pay interest, pay interest, pay minimum sum, pay interest, pay interest, overspend, pay minimum sum, struggle, pay interest, pay interest, overspend, pay interest, pay interest, pay interest, pay interest ...

... and then default. By then the banks have already collected lots and lots of money from you already (mostly interest) so it's okay if they can't recover the last couple of thousand bucks. You already previously gave them multiples of that amount in interest income.