Maybe That’s Why it’s Called a "Discover" Card

Monday, May 18, 2009

Credit card companies know a lot more about you then you think. Faced with huge losses, they've turned to consumer profiling to find out everything from what kind of birdseed you buy to which bars you frequent, all in an effort to get you pay your bill. New York Times reporter Charles Duhigg investigated their practices. His report, "Something Borrowed" appears in the Times' Sunday Magazine.


Charles Duhigg

Comments [23]

TFoster from New York

Amazing that banks and CC co’s are begging us to go paperless (going green!), yet these same companies continue to jam up our mailboxes with unsolicited marketing materials (based on their intense profiling efforts). Would be better for society if they saved those marketing and mailing dollars and cut out the usurious rates. I ran the numbers assuming banks’ rates were limited to some multiple of say 5 - 10X passbook savings rates, say 5%., vs. ~20+% they regularly charge and added on the typical bogus late charges and annual fees they nail us with and looks like as much of a third of the balance (which could top $186 billion per NYT) is related to excessive interest and bogus late and annual fee charges. In fact, many folks who have almost paid for their purchases are left with balances consisting of hundreds or even thousands of dollars of fees and interest. Also, keep in mind that on every transaction, banks charge merchants 2 – 4% (higher for smaller mom and pop merchants). Nothing wrong with making a profit but banks could still do just fine without all the snooping and gouging.

May. 18 2009 01:57 PM
Amy from Manhattan

On Liz [14]: Yes, but paying the tax costs less than paying the credit card charges--w/their interest continuing to accumulate.

And Carl [19], meet Tony [15]. My credit card is w/a credit union, & I haven't had any of the problems discussed on this segment. In fact, last time I got my renewed card, there was a summary of terms enclosed (not that I didn't read the whole agreement) that stated clearly that the interest would default to a higher rate if 2 payments were missed, but also that it would revert to the original rate after 3 on-time payments.

May. 18 2009 12:51 PM

strange segment

May. 18 2009 12:43 PM
McGill from Montreal

Section 61 of the \internal Reveune Code defines gross income. Whenever a valid debt is forgiven, the person who is let off the hook accrues gross income. Such income is taxable in the year of forgiveness

May. 18 2009 12:37 PM
Carl from Long Valley

Why are there no "GOOD" credit card companies?
Why isn't there any company that will offer cards without the fine print and high rates?

May. 18 2009 12:36 PM
Hugh from Brookyn

"Consumer attitudes have to change."

Yes. But let's remember that the government and the all the companies making loans have been encouraging us and deceiving us into spending spending spending for decades.

Remember Bush post-9/11. "Go out and buy."

May. 18 2009 12:36 PM

1. setting usury rate/limit
2. correlating monthly payment and final payment of balance

these two factors (and aren't they the only ones that really matter?) were way too politically hot for the so called consumer card rights legislation

May. 18 2009 12:36 PM
steve miller from scarsdale

I'm a very responsible payer with about 5 cards (only use 1 regularly tho). I called up one of my cards to cancel just because I never use it, and they got an agent on the phone who said "What do I need to do to get you to keep this card" - gave me all kinds of bells and whistles and an interest rate below 10%. I'm still not using hte card tho.

May. 18 2009 12:34 PM
Tony from San Jose, CA

Amex "lost" my check and tried to charge me fees. I now always pay online.

Also, I dropped B of A and switched to a local CU.

May. 18 2009 12:31 PM
Liz in NYC from Manhattan

Please be aware that if credit card debt is removed from your balance, you still have to pay tax on it. It will be reported as unearned income for that tax year.

May. 18 2009 12:31 PM
Carl from Long Valley

RIDICULOUS, criminal and morally reprehensible.
Why don;t they try LOW interest rates -- AND, charge no interest on the interest and fees that THEY charged you (you did NOT spend it). PLUS, they should be forced to raise the minimum payments amounts to make it more realistic that it might be paid off -- rather than keep people in bondage to them forever.
I also agree with the comment just on-air that the ususary issue is the heart --GREED drives these companies. Reduce this for the good of the country.

May. 18 2009 12:28 PM
Hugh from Brookyn

How about a debt strike?!

Clearly, the financial institutions of the US did some strong-arming to get the great terms and the vast billions they have from the Oligarchs.

So what can We the People do? Voting doesn't work. Obama is just flipflopping on everything.

A debt strike will wake them up. People have to remind both the government and its massive donors on Wall Street (or Delaware or North Dakota) that this is not just a democracy in name.

As for usury, the laws barring usury were abolished in the Reagan years. Big surprise.

May. 18 2009 12:27 PM

(99% legal fyi)

May. 18 2009 12:27 PM
John LaVallee from Brooklyn

If the credit card companies are so worried about defaults why are they raising interest rates on customers that pay their bills on time? If they raise interest on people that are on the edge defaults will surely increase. What are they thinking???

May. 18 2009 12:27 PM

relationship between interest rate and payment rate?

in other words, is there an obligational difference between principal and interest??

May. 18 2009 12:26 PM
kai from NJ-NYC

MBNA was a terrible and usurious company with poor business practices. BofA were fools to purchase them without considering the underlying business practice of handing out easy credit to those that should not have had it (me and my friends) on which MBNA was built.

May. 18 2009 12:25 PM
KC from NYC

How many millions of dollars did Citi spend on its "Live Richly" ad campaign? Was not the entire point of that campaign "spend money as if you were wealthy, even though you clearly aren't"? There's a reason credit card companies are our punching bags: because they deserve it, and deserve far worse.

They're all in Delaware so that they can charge whatever interest rates they want. They have now taken our tax money are are raising our rates. Usury is the ENTIRE POINT of those companies. Let's not soft-pedal.

May. 18 2009 12:19 PM

Are the credit card companies fears of consumer defaults likely to become self-fulfilling? That is, are higher interest rates, limit reductions, etc, likely to drive some customers into default who otherwise would pay?

May. 18 2009 12:14 PM
Hugh from Brookyn

"There's a lot of practices that are going to have to change."

Sure, and those smart credit con artists are already working on new, ingenious, legal ways to stiff us.

We can be sure, based on their track record to date, that Obama, Geithner, Bernanke & Co. will be ready and willing to aid the credit companies to rob us in new and inventive ways.

May. 18 2009 12:14 PM
Tom Gubanich from Fort Greene

Higher default rates? Maybe 20% to 30% interest rates have something to do with that.

May. 18 2009 12:14 PM
Hugh from Brookyn

Well, we already know that the Obama administration is not going to bail out We the People directly.

So, we just default on our credit cards, then the credit card companies can go to Obama and Geithner and the companies can get the bailout.

May. 18 2009 12:12 PM

Wrong track, Leonard.

CC companies are tracking this info simply b/c (often through 3rd party vendors) they technically CAN.

It's a technology thang.

May. 18 2009 12:11 PM

Frankly, my biggest gripe with the liberties taken by Bank of America and the other welfare-based financial services companies is their nasty habit of making our personal credit and social security information available to whichever hackers and "criminal" (whatever THAT means anymore) gangs who sell this info.

Can't the banks just use the same encryption software that's keeping those Bush torture pictures from reaching the web? What are the rules effecting their practices?

May. 18 2009 12:06 PM

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