Interview With An Insider, Part 3 and Conclusions

Welcome to Part 3 of my interview with a credit card insider. The Insider agreed to speak with me on the condition of anonymity.

Part 1 can be found here.

Part 2 can be found here.

JSteele: In the old days, people who paid their debts on time, and didn’t owe more than they could pay were guaranteed good credit. With the advent of credit scoring, we see situations where people who owe little and pay their bills on time do not necessarily have good credit. Not having enough credit credit cars (ironically) hurts their score and having too many inquiries hurts their score. Often the inquiries are essentially harmless, i.e., they do not actually represent an increase in risk. Such examples may include employer inquiries, shopping for a new insurance company, opening a new bank account, car shopping, or even looking up one’s own credit score. Heaven forbid one should get a job in a different part of the country as they might do all these things at once and (temporarily) ruin their credit! Are companies aware of these false indicators of risk that erroneously drive down credit scores? Do they care, or do they just blindly look at the score?

Insider: Overall, companies blindly follow the credit score – they figure that for the most part, the scores will be correct and they don’t have the personnel to go out and speak with each applicant to determine why their score may be temporarily lower.

JSteele: What long term changes to the credit card industry do you see as a result of the current fiscal crisis?

Insider: Long-term changes – none. We may see changes briefly when the new rules are enacted, but the banks will find a way to make money – they have to – it’s a business. Instead of complaining about double cycle billing, universal default, payment allocation – we’ll find the “new” things they’ll enact even more onerous (i.e., we used to complain about $15 late fees and low credit lines).

[I] Hope This Helps

JSteele: Thank you again for your insight.

Conclusions

If there is one quote from this that summarizes the permanent state of the credit card industry it is this:

“the banks will find a way to make money – they have to – it’s a business. “

This should come as no surprise to anybody. In fact, most of the information provided by our insider makes sense and is consistent with what we know about credit card companies: The are greedy. They are careless. They will push and push until either the customers or the government take a stand.

While both the Insider and I are applauding the new rules, the Insider is rightly skeptical that the rules will change any behavior other than those specifically addressed. It is depressing that the Insider predicts that, like the enemy in a protracted war, the banks will adapt to the new rules and change strategies.

As a result of this interview, you should redouble your efforts to:

1. Always pay your bills electronically. This is the only sure fire way to avoid late fees. When you initiate payment from your bank’s web site, you have a record of when payment is issued. No lost or delayed mail, no accidentally shredded checks, no stamps, no worries.

2. Be fee-phobic. Knowing that the credit card companies are laughing at you for paying foreign transaction fees should make you get a Schwab, Capitol One, or some other foreign transaction fee free card before your next trip outside of the United States.

3. Be Nice. People who work at credit card issuers are still people. They have spouses, parents, and children. If you are frustrated dealing with them for a few minutes a month, imagine how they feel having to deal with their company eight hours a day! If you don’t get what you want from your agent, don’t get mad. Politely ask for a supervisor or just call back and speak with someone else. Be nice both because it is the right thing to do and because you are more likely to get what you want from the person.

4. Always ask for a break. It shouldn’t surprise you that reps are not allowed to offer to waive things. They can only do so if you ask. Remember, the worst they can say is no, so you have nothing to lose.