Cash or credit?

Dilip Bobb Posted online: Sunday, Sep 15, 2013 at 0000 hrs
Everywhere, there are signs telling us to avoid plastic. In reality, the opposite is happening. Standing in line at a department store counter to pay for my purchases, I was third in the queue. The two people in front of me, a man and a woman, both in their early 20s but not connected, had their wallets stuffed with credit cards. Each had at least four, if not more, from what I could see. Carrying so many cards, with the temptation of use and different charges and interest payments, is not very smart, but it’s become a status thing. “You don’t take American Express? No problem, I have Mastercard, or would you prefer Visa instead?” I get calls and emails from a variety of banks I have no dealings with, offering me credit cards with no annual subscription and all sorts of freebies. Plastic may be bad for the environment, but the type you carry in your wallet has an allure that’s difficult to resist, even though it may actually leave you in debt for most of your working life.

The beauty of credit cards is that the downside is subtly hidden while the benefits are plugged for all they are worth. Then there is the status thing; silver cards gave way to gold, which gave way to platinum, and now, there are black cards and even palladium and titanium. Dubai’s First Royale Mastercard is made from real gold and has a diamond set in the card. All the big players—Amex, Mastercard, Citibank and Visa, as well as leading banks, have VIP cards for their richest clients, which come with special services. All this is a long way from the origins of credit cards, in America, during the 1920s. It started with individual firms, mainly oil companies and hotel chains, issuing them to regular customers. It took another 20 years before companies started to accept each other’s cards. The early cards were printed on thick paper, but were easily counterfeited so metal, celluloid and fibres were experimented with before plastic took over. In 1950, Diners Club issued their credit card, strictly for paying restaurant bills. American Express issued their first credit card in 1958 and Bank of America followed with the BankAmericard (now Visa). The global economic crisis has changed the business plan and put an end to the days of handing out cards indiscriminately, hoping that the cardholders who pay up will offset the losses from those who default. Today, credit card companies are becoming much more interested in understanding their customers’ lives and psyches because, the theory goes, knowing what makes cardholders tick will help firms determine who is a good bet and who should be shown the door as quickly as possible.

Data-driven psychologists are now in high demand, and the industry is using them not only to screen out risky debtors, but also to determine which cardholders need a phone call to persuade them to mail in a check. Most major credit card companies have set up systems to comb through cardholders’ data for signs that someone is going to stop making payments. Are cardholders suddenly logging in at 1 in the morning? It might signal sleeplessness due to anxiety. Are they using their cards for groceries? It might mean they are trying to conserve cash. Have they started using their cards for therapy sessions? Do they call the card company in the middle of the day when they should be at work? If someone pays for a big-screen television with their card, are they rich? Or does it signal that they don’t have the sense to avoid products they can’t afford? If they check their balance three times a day, are they worried or uptight? So next time you get a call from your credit card provider, usually a woman, politely reminding you that your payment is due, remember she’s also listening to the tone of your voice, which tells her whether you are under strain or not.

The writer is Group Editor, Special Projects & Features, The Indian Express