Punishing Credit Card “Deadbeats”

Frontline did a story about credit card companies and revealed that those who pay off their balances each month are called “deadbeats” for using credit without paying interest. So the question arises: is the current change in grace period a strategy for punishing these credit card “deadbeats?”

After all, when you look at the fallout due to the credit card industry changing the grace period on credit card accounts from 30 days to 25, it seems clear that the change is causing distress mainly to one group.

That group contains the fifty million or so Americans who pay off their credit cards each month, people that the credit card industry refers to as “deadbeats.”

This becomes evident in the type of customer who calls in to inquire about the change, because not every customer is upset. Those customers with whom I’ve spoken who are upset about the death of the 30-day grace period on their credit card accounts are, invariably, those who pay their accounts off every month.

A Customer Calls In

I talked to a customer just the other night who was calling about the change. His grace period had been shortened from 30 days to 25 days and he wasn’t happy about it.

He had just bought a large purchase near the end of his billing cycle and was expecting to have a longer period to pay it off.  He realized, however, that something had changed and his credit card account payment was required sooner than expected so he called in to find out what was going on.

I explained what’s happening as best I could in between his very vocal complaints about how credit card companies rip off their  customers and look for more and sneakier ways to gouge people for more money. And, certainly, he could find no one more sympathetic to his dilemma.

Certainly credit card companies are now getting their money sooner from those customers who normally pay off their balances, and I believe this is their first objective. 

I believe this change is aimed at all you “deadbeats” out there who pay off your balances each month. Instead of rewarding you for your prudent fiscal management, credit card companies have decided that your “free ride” is going to be 5 days shorter each month.

Yet this move may also be a calculated tactic to get interest out of some of you.

Like the man I spoke with who would normally pay off his balance, you may be taken by surprise by these changes, be unable to pay the full amount that you owe, and you may be looking at carrying over part of your credit card balance as a result.

I would not be at all surprised if consultants to the industry fully anticipated such scenarios and see this change to the grace period as a way of turning more ”deadbeats” (payers) into “revolvers” – at least temporarily – since financial institutions are in trouble and looking for cash.

Yet, how does this change affect those customers who never completely pay off their credit card accounts?

I’ll write about that in my next post.