A letter appears from your financial institution, telling you you’re pre-approved for a credit-limit increase. All you have to do is tick, sign and send it off, and you’re ready to spend again.
Magic? Actually, no; it’s called marketing, cleverly disguised as a favour. And insidiously effective, according to a recent report by the Consumer Action Law Centre.
Their report, titled ‘Congratulations, you’re pre-approved!: An analysis of credit limit upselling letters’ (August 2008), found that banks and other credit providers use a range of psychological manipulations to persuade, encourage and convince their current customers to take up a credit card limit increase.
Dr Paul Harrison, senior lecturer in consumer behaviour and marketing at Deakin University and principal researcher of the report, began by looking at the language used in the offer letters we receive.
He soon realised that our reactions to such letters went well beyond the wording — they went right to the heart of our relationship with our finances. ‘People have a very low involvement in their relationship with their finances’, he says.
‘We view banks almost like utilities and we don’t think that much about what the bank is doing. We form a trust relationship with the bank and assume they’ll be looking after our money. When we form a trust relationship, our willingness to take a risk increases. In simple terms, we let down our guard.’
We assume the bank will act in our best interests, just because they’re the bank. We forget that banks are not a community service; they’re mostly highly profitable businesses. ‘Marketing always exploits vulnerabilities’, says Dr Harrison.
‘Banks are making money out of your credit card, and it’s not by accident they’re making big profits.’
Of course, in light of recent world events our lack of interest in what the bank is doing with our money might change, but most of us will continue not to think about it.
We’ll just deposit our salaries, use our ATM cards and assume that money will come out of the wall. We’ll trust that the bank is doing the right thing by us. And, according to Dr Harrison, when the chips are down and we’re feeling a bit vulnerable (due to possible lack of cash), we’re more likely to look upon a credit-limit increase offer as a favour, rather than seeing it as an invitation to pay the bank more money in interest.
money.ninemsn.com.au March 2009 Full story here
Since it's corporations defrauding the general public NO ACTION is ever taken against these Goliaths.
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