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A 2002 study of how customers of Canadian Tire were using the company's credit cards found that 2,220 of 100,000 cardholders who used their credit cards in drinking places missed four payments within the next 12 months. By contrast, only 530 of the cardholders who used their credit cards at the dentist missed four payments within the next 12 months.
I'm sure we can all drink to that
May 17, 2009
Magazine Preview
Your Credit-Card Company Wants to Get to Know You
By CHARLES DUHIGG
Rudy Santana’s day began recently, as almost all his working days begin, with a name on a screen. The name that April morning belonged to a Massachusetts man in his mid-30s. He owed money on a credit card and a second mortgage, the screen told Santana, and was separated from his wife. He was behind in paying back $28,900.97 in debt. Which was why he was on Santana’s screen.
When Santana reached him by phone, the man quickly began talking about his ex-wife. “Listen,” the man said. “I called her about this debt, and a guy picked up — a guy I’ve never heard before — and when I asked for her, he hung up on me. Can you believe that? We used that money to renovate the kitchen! And now she won’t even talk to me! Who the hell was that guy who answered the phone?”
“So you’ve spoken to your wife?” Santana asked, his voice soft and gentle. “Were you able to have a good talk with her? Even when you’re angry, it’s important to talk. Did you talk about the debt?”
“Yeah, we talked about it,” the man replied. He paused and released a small sob. “You know, she told me we would be together until we died. I know I have to pay this. But I’m not going to pay her half. I won’t damn pay it.”
“I know,” Santana said. “This is difficult, and I’ll be honest — I think you’re doing a great job. You’re really strong. But the thing is, to the bank, they don’t make a distinction between you and your wife. To them, it’s just debt. They just want to get paid.
“I think I can do something for you, though,” Santana continued, glancing at his screen. It was filled with information about the man, including the fact that he had recently sold his home at a loss. Some of this information had been sent by the man’s bank to Santana’s employer, Sunrise Credit Services, which collects delinquent debts for companies like Citigroup, Bank of America and HSBC. Santana’s company had added notes, too, including helpful tips — he is easier to reach in the mornings, for example — and new ways to contact him.
“Look,” Santana said. “I know you’re angry at your wife. One step to ending that anger is putting this debt behind you. It will really help you find peace. You owe about $29,000. How much do you think you can pay?”
“Well, how much are you gonna help me?” the man shot back. “These banks got all this taxpayer money from the government, and they’re the ones who ruined the market for my house! I helped bail them out. I think the banks should be paying me, instead of trying to suck all the life out of us they can!”
It was the first of numerous blowups that Santana would confront that day. Bill collectors don’t tend to encounter many pleasantries, even in the best of times. And these are nowhere near the best of times, for borrowers or for the banking and credit-card industries that lend to them. After two decades of almost constant expansion and profitability, card companies today are in deep trouble. Monstrous losses — estimated to top $395 billion over the next five years — are growing as cardholders, brought low by the recession, walk away from their debts. And Congress and President Obama are pushing for legislation that would make it much harder for companies to hike up interest rates and charge many of the sneaky fees that have been an easy source of revenue for years.
So credit-card firms are changing their business plans. Gone are the days of handing out cards willy-nilly and hoping that the cardholders who dutifully pay up will offset the losses from those who default. Today companies are focusing on those customers most likely to honor their debts. And they are looking for ways to convince existing cardholders that if they only have enough money to pay one bill, it’s wiser to pay off their credit card than, say, the phone.
Put another way, 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.
http://www.nytimes.com/2009/05/17/ma...edit-t.html?hp
I'm sure we can all drink to that
May 17, 2009
When Santana reached him by phone, the man quickly began talking about his ex-wife. “Listen,” the man said. “I called her about this debt, and a guy picked up — a guy I’ve never heard before — and when I asked for her, he hung up on me. Can you believe that? We used that money to renovate the kitchen! And now she won’t even talk to me! Who the hell was that guy who answered the phone?”
“So you’ve spoken to your wife?” Santana asked, his voice soft and gentle. “Were you able to have a good talk with her? Even when you’re angry, it’s important to talk. Did you talk about the debt?”
“Yeah, we talked about it,” the man replied. He paused and released a small sob. “You know, she told me we would be together until we died. I know I have to pay this. But I’m not going to pay her half. I won’t damn pay it.”
“I know,” Santana said. “This is difficult, and I’ll be honest — I think you’re doing a great job. You’re really strong. But the thing is, to the bank, they don’t make a distinction between you and your wife. To them, it’s just debt. They just want to get paid.
“I think I can do something for you, though,” Santana continued, glancing at his screen. It was filled with information about the man, including the fact that he had recently sold his home at a loss. Some of this information had been sent by the man’s bank to Santana’s employer, Sunrise Credit Services, which collects delinquent debts for companies like Citigroup, Bank of America and HSBC. Santana’s company had added notes, too, including helpful tips — he is easier to reach in the mornings, for example — and new ways to contact him.
“Look,” Santana said. “I know you’re angry at your wife. One step to ending that anger is putting this debt behind you. It will really help you find peace. You owe about $29,000. How much do you think you can pay?”
“Well, how much are you gonna help me?” the man shot back. “These banks got all this taxpayer money from the government, and they’re the ones who ruined the market for my house! I helped bail them out. I think the banks should be paying me, instead of trying to suck all the life out of us they can!”
It was the first of numerous blowups that Santana would confront that day. Bill collectors don’t tend to encounter many pleasantries, even in the best of times. And these are nowhere near the best of times, for borrowers or for the banking and credit-card industries that lend to them. After two decades of almost constant expansion and profitability, card companies today are in deep trouble. Monstrous losses — estimated to top $395 billion over the next five years — are growing as cardholders, brought low by the recession, walk away from their debts. And Congress and President Obama are pushing for legislation that would make it much harder for companies to hike up interest rates and charge many of the sneaky fees that have been an easy source of revenue for years.
So credit-card firms are changing their business plans. Gone are the days of handing out cards willy-nilly and hoping that the cardholders who dutifully pay up will offset the losses from those who default. Today companies are focusing on those customers most likely to honor their debts. And they are looking for ways to convince existing cardholders that if they only have enough money to pay one bill, it’s wiser to pay off their credit card than, say, the phone.
Put another way, 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.
http://www.nytimes.com/2009/05/17/ma...edit-t.html?hp