On Credit Cards
This Times article on how credit card companies work, and how they are now changing, is fascinating and well worth the read:
Luckily for the industry, small groups of executives at most of the large firms have spent the last decade studying cardholders from almost every angle, and collection agencies have developed more sophisticated dunning techniques. They have sought to draw psychological and behavioral lessons from the enormous amounts of data the credit-card companies collect every day. They’ve run thousands of tests and crunched the numbers on millions of accounts. One result of all that labor is the conversation between Santana — a former bouncer whose higher education consists solely of corporate-sponsored classes like “the Psychology of Collections” — and the man from Massachusetts. When Santana contacted the man last month, he was armed with detailed information about his life and trained in which psychological approaches were most likely to succeed.
(via Lone Gunman)
See also this post:
One model is that the credit card companies are lying to you – they think of you less as an individual to have a dynamic risk factor dynamically assigned to you, and instead as part of a portfolio to have a specific rate of return extracted from. So they have statisticians and psychologists not to create a credit risk, but instead to figure out who is likely to pay what when, and use that to keep their returns very high. Quants to study how much they can squeeze from someone – not too much, but not too little. So it is less about the awesome part of markets, the price information and the convergence and feedback, and something more feudal.
(via Yglesias)
He goes on to do all the maths, but I went blank at all the numbers.
Frankly, as the type of person who always pays my bills the very same day I get them in the mail, I’m quite sure I’d always pay my balance off each month if I had a credit card (I never have had one), so I’m probably not a desireable customer for credit card companies. They don’t realize that about me, though: almost every single day last year, I received a credit card offer in the mail, from my bank, Washington Mutual. I actually called them to tell them to stop it, and the woman straight up told me that I would continue to receive them until I signed up for a card and there was nothing anybody could do about it. Little did she know! Since the collapse of the general economy and WaMu’s absorption by Chase, I have yet to receive one single offer. Which is all well and good till I want to buy a house. But then, it’s looking highly unlikely any of us will be buying houses in the future, so whatevs.
