Caught in a phishing trap

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credit whiplash for card issuers

"Phishing" is essentially the chickens coming home to roost for a very bad business model that has been in place for some time now where personal credit is concerned.

The basic (pre-phishing) idea was to give as many people as possible "credit" of some kind. The high interest charged on most credit card balances is a direct result of the card companies putting too much credit into unqualified hands. The card issuers do this because they know that the high interest charged to the majority responsible card users will more than cover the losses from deadbeats. And, of course, they still have full legal recourse to hound the deadbeats unmercifully for even more profit by selling their overdue debt to third-party collection agents.

This marketing methodology was adopted because otherwise it would cost the credit card companies considerable amounts to properly qualify everyone offered credit in those "pre-approved" bulk mailings for new cards we all get on a weekly (daily?) basis. The standard joke here is about families receiving "pre-approved" credit card offers addressed their minor children and pets!

But phishing has effectively derailed this timeworn business model because now large numbers of honest (though stupid) credit card users are being duped into providing scammers with the information they need to go on wild shopping sprees. And this time the money will NEVER be paid back to the credit card companies. One hopes the credit card industry will WAKE UP because they are not going to get away with charging everyone who carries a balance 50-100% interest. The losses from phishing are becoming far too large for the old methods (gouging honest customers, selling debt) to work anymore.

Posted by: dmennie   Posted on: 11/23/04 You are currently: a Guest | Members login | Terms of Use

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