When are credit card company co-branding partners going to wake up to the fact that the companies they sign up with to issue their cards hurt their customer or member relationships…and start doing better for them?
Here’s an example: I recently (and reluctantly) opened a Home Depot card to pay for some major home repairs with one-year interest-free financing. I say reluctantly because I know there are plenty of traps in these offers. One slip up on this card and you’re stuck with a 21% interest rate for the entire balance. Ugh. (I won’t go into those details here because John Ulzheimer already did a great job exposing them in a previous post).
But besides the "gottchas" in the fine print what really irks me is the way these companies hand all the blame over to the card issuer and take no responsibilty for the card bearing their name.
In this example, I filled out the application in the store, and when the clerk handed me the approval form, he warned me very seriously, "Now we don’t issue this credit card, Citibank does. And their policy is that your payment has to arrive before 1 pm on the due date. If you are even one hour late getting here with your check, you will be late, they will charge you a late fee, and there is nothing we can do about it."
It was
pretty clear that this employee had dealt with customers who had shown up at Home Depot’s customer services desk at 1:01 pm or later on the due to pay their bills.
As for "we can’t control it," I think it’s dangerous to have to use that line. Whose name is on the front of that orange card? And, secondly, does a company the size of Home Depot want to convey to customers that it has no clout to seek out better credit card terms for its customers?
Another example: I had a Southwest credit card with an outstanding balance at 3.99% for the life of the balance. I charged a car rental to that card, and guess what the interest rate was on that one purchase? 29.99%! With no lates ever on my credit history, the issuer must have decided they wanted to make money on me one way or another so they socked it to me with the highest interest rate possible.
Now I know that Southwest doesn’t issue that credit card and they "have no control over it." But how does that experience reflect on Southwest Airlines, whose name is on the front of the card? Do you think I will
ever use my Southwest Rewards credit card to make another purchase,
much less to purchase Southwest Airline tickets?
If Herb Kelleher could shake up the airline industry you would think he could shake up things with the credit card industry a bit.
I’ve given up hope that most of the major issuers are going to voluntarily stop some of the egregious practices in the card industry today. But partners like Home Depot and Southwest airlines, have a customer relationship to protect. I would think they have some muscle too. When are they going to use it?
Have you had an experience with a co-branded credit card that turned you off to the sponsor? Please share it here.
Gerri Detweiler Credit.com's Personal Finance Expert, Gerri focuses on financial legislation, budgeting, debt recovery and consumer savings information. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, and Reduce Stress: Real-Life Solutions for Solving Your Credit Crisis as well as host of TalkCreditRadio.comTalk Credit Radio. Reach Gerri at creditexperts@credit.com.
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I’ve worked with both co-branding partners and credit card issuers (banks) and I can tell you that all their muscle has been used up in screwing their “partners” into providing the features they want at lowest possible cost. As long as they can blame any customer satisfaction issues on one of their “partners” they’d rather do that than have to pay more to an alternate supplier who will provide better servicer or conditions to the customers.
Even so, you’d be amazed at how often each party will have agreed to quite stringent business rules (eg. our system processes payments with a cut-off time of 1pm) and then asks for changes to be made for free after launch. I’d expect in cases like you mention they have agreed to the 1pm cut-off time (as they didn’t want to pay for customised changes to the suppliers existing systems), and agreed to address any customer service issues themselves (eg. their choice to authorise (pay for) a credit back on to the customers account if the customer complains). What then happens is they choose to save costs by passing the blame on to the supplier of the service.
Regards
http://enoughwealth.blogspot.com
Regarding the 29.99% rate on new charges to a card that had an existing balance with a rate of 3.99% for the life of the balance – this is standard for nearly all such offers! eg. If you get a 0% balance transfer offer, the transferred balance is charged 0% until the offer period expires, but any NEW charges immediately attract the highest applicable interest rate – and any payments are normally deducted from the lowest interest rate balance first – so the new charge would be sitting at the high interest rate until the entire 0% balance transfer is paid off.
I don’t think this is particularly bad behaviour by the charge company – after all they are losing money on the balance at 3.99% (they usually have costs of the prime lending rate + around 2% for admin and overheads).
If some people didn’t end up paying 29.99% then they’d be no 0% balance transfer offers available for all the PF bloggers to profit from!
I think it’s ridiculous. Isn’t the point of a store credit to create store loyalty? How on earth could anyone be loyal to a store that allows people to be bilked!
I remember how angry my parents were when department stores started selling off their credit accounts to these banks that then charge sky-high interest and have draconian rules. They ended up cancelling just about all of them (not that I think they had very many) so now why would they be drawn to those stores?
I guess what confuses me is that store credit cards were originally considered to be a sort of customer service. Aren’t stores just shooting themselves in the foot by these deals that are set up to screw over the consumer? How do stores not see the disconnect here?
I think
Store cards are a horrible Idea, they just push you farther and farther into debt, and act as an invitation to spend money that you do not have.
Most high interest credit cards are usually easy to get and really the interest rate only matters if you roll over your balances from month to month. People that have had bankruptcies, judgments or just have a bad credit rating, for what ever reason are the most common applicants for high interest credit cards.
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So, I am five years late to the conversation… There seem to be two issues here. The first being profit and the second being personal responsibility.
Regarding profit, if the partners involved don’t make money through the offer, it won’t be offered. The purpose of being in business is to make money, which isn’t bad, or wrong. What the company does with its money is a different issue, but jobs are not created, and families are not supported if the offering companies don’t make a profit. The consumer is given clear notification that they will be paying more for their purchase if using credit. The consumer gets the credit they want and the company gets the profit they want. With clear disclosure, this is a win-win situation.
Regarding personal responsibility, Ms. Detweiler is upset that the store didn’t take responsibility, but passed the enforcement of the credit card rules to the credit card company. Frankly, kudos to Home Depot for stating a second time the consequence of the borrower not being responsible! It is rare that a company will tell you, verbally, that there are difficult consequences if you can’t follow the rules. If the consumer is not willing to meet the obligations of the credit agreement, they should not take the credit. In this case, that bit of negative disclosure was worth risking the loss of the sale. Way to go! On the other hand it would be unconscionable if the credit company didn’t follow the rules they outlined! But, there is frustration if the consumer isn’t allowed to bend the rules in the name of “good customer service.”
Customer relationships are improved through providing the customer what they want, products, services and credit; and offering exceptional customer service including clear communication.
Bill – You’re never too late to the conversation.
I don’t disagree with your kudos for the Home Depot employee who pointed out the rules to me. What bothers me is the notion that a company the size (and with the clout) of Home Depot didn’t negotiate more reasonable terms for its customers in the first place. A 1 pm cut off time for payments – really? Would Home Depot every try to institute a return policy that required customers to return items by 1 pm or forfeit their return? To paraphrase Elizabeth Warren, the products that lined the store’s shelves probably went through more rigorous safety testing and standards than the cards there were offering.
Fortunately, this post was written pre-Credit CARD Act and some of what I (and many other advocates) considered egregious practices in the industry changed when that law went into effect.