The truth behind credit cards marketing

The devil they say is in the detail and when it comes to small print or fine print on the credit card terms and conditions, this statement is all the more relevant. Unfortunately, we often skip reading them carefully and that turns out to be a costly mistake.

You realize it when you default on a payment or err in making one and suddenly find yourself hit with all kinds of fines and levies.

So what is this mental psyche of not reading the fine print and how is it that we can escape the penalties?

BBC Two’s popular programme Money Watch featured Clare Francis, the editor of the site moneysupermarket.com to try and understand why so many of us neglect or are apathetic to fine print.

At the show, she brought out a fictitious but new platinum card complete with its terms and conditions along the same lines as a real one except that this one had an unbelievably low rate of interest. The other incentives like the cash back offer and 0% deals were however kept the same for this Money Watch card.

The participants in the programme ensured that the advertising display board and leaflets mentioning the special offer of the card was made and they then started selling the card at one of the shopping centres.

Clare Francis who spearheaded this activity was reasonably sure that very few people would be able to detect some of the more obvious flaws despite the fact that these were quite apparent in the advertising material.

She deliberately positioned the fine print at the very bottom of the display and even designed a summary box behind the leaflet to enable people to access the information but was quite certain that most of the target audience would not notice it at all.

So where was the catch?

To start with, the Money Watch card carried a very attractive 11.9% APR or annual percentage interest rate. The fact however is that no member would be getting that rate.  In fact, members would a less than desirable credit rating would even have to pay much higher interest rates.

This 11.9% APR would also be applicable only for purchases and other transactions like cash withdrawals as well as balance transfers would be charged at a huge 34.9%.

 Attractive 0% offers

The Money Watch card is replete with wonderful 0% offers such as no levy of interest on balance transfers for the first nine months and no interest levied for the first 13 months on purchases. However, there are some things that need scrutiny.

The offer on the balance transfer is valid only for such transfers done within the first 20 days after becoming a member. If this is not done, then the member pays 34.9% on all his transactions.

If the member has to get the benefit of 0% interest on any purchase, then he has to compulsorily show a spending of at least £2000 within the first quarter. If that is not done then you would lose out on the offer of the free interest duration.

Similarly, the attractive offer of cash back of 5% on any purchase made is valid only if you can show a spending of more than £8000. Any amount spends of less than £8000 will not qualify for the cash back.

Things are not this bad in real life

The Money Watch Platinum card obviously has certain caveats that are a bit over board and exaggerated but many real life credit cards do have caveats and conditions that are similar and if you do not take the trouble of reading the fine print, you can get into a position where you are compelled to make heavy penalty payments.

The problems faced by many individuals is reflected in the over 45,000 queries related to debt handled by the Citizens Advice Bureau for both England as well as Wales every week.

Mr. Alex MacDermott who advises the bureau on all finance related issues has mentioned that the primary objective of the bureau is to vastly improve the understanding of finance amongst the people.

He feels that doing this would help people get into situations of heavy debt as they would be making prudent credit purchase decisions.

Clare is of the opinion that reading the fine print carefully would also help in making best use of the card to our advantage since many of the terms and conditions as well as deals are beneficial to the card member and it is up to him to understand them better in order to take full advantage. She goes on to say that you can even save some money if you take the effort of going over the terms and conditions as well as the special offers.