June 23rd, 2006

Soccer Hooligan

For you to contemplate

Suppose for a moment that you are on the board for a large multi-national credit provider and are in the process of drafting a policy in regards to penalties for late payments. Which would you consider a better option:

a) A policy that allows enough flexibility that your customers would retain his account at a relatively reasonable APR; or

b) A policy that is so rigid that the usurous penalty APR is locked in for a period long enough that the card is rendered effectively useless as an financial instrument and ultimately forces the customer to close his account?

Before you answer, consider the following scenario: A customer has offered to pay off his balance in full in order to return his account to good standing. This customer also happens to have a twelve-year history with the company and has, with a few rare instances, retained a satisfactory payment history. Is a non-negotiable 29.9% penalty APR, which you will certainly never collect on, really worth alienating this kind of customer over?

Well folks, American Express thinks it is. Kudos, boys. Your Blue card is very stylish, and will soon be unceremoniously disposed of. The fate of my other account with you is also in danger should a sufficiently enticing offer be provided by another creditor. Given the rate at which I am inundated with such offers, I imagine that one will be received at some point in the next week or so.