Five Ways For Banks To Boost Credit Card Use

credit-cards-04-fiI got my first credit card in the late ’80s. I’ve been a major fan of plastic since then. Rewards, deferred payment and a built-in line of defence from fraud – these are some of the reasons I pay with credit cards as far as possible.

That said, during the same period, I’ve come across many people who’re wary of using credit cards. When I ask them why they eschew plastic, they give me several reasons, some of which are genuine (e.g. fear of incurring hefty fees if they forget to pay the bill on time) and others, rooted in misconceptions (e.g. credit card implies debt).

Banks earn interchange fees when their customers pay with credit cards. On the other hand, when consumers pay with cash, banks are hit with a double-whammy: They incur a cost on the ATM withdrawal but they don’t earn any interchange revenue on the cash transaction. Therefore, it’s in their interest to increase credit card usage (and reduce cash usage).

There are many ways by which banks can stimulate credit card volumes by helping fencesitters among their customer base to shed their inhibitions towards credit cards. Some of them are outlined below.

#1. Reiterate Deferred Payment

The average customer knows that they get up to 45 days to pay off a credit card purchase without incurring any charge. This is unlike debit card purchases where the money is taken off from the payer’s bank account within a day or two. It would help if banks reiterate this message, especially to convert debit card usage to credit card.

#2. Stop Nickel And Diming

nickeldimeAs far as I can recollect, all my credit card statements have always specified the payable amount to the second decimal place viz. ₹ 48,758.78. Since the 78 paise seems to be such a big deal for the bank, it can go ahead and round up the payable amount to the next higher ₹ (or £ or € or $, as the case may be) viz. 48,759. I’d rather overpay by 22 paise than incur late payment fees and interest charges if I miss out the 78 and pay only ₹ 48758.

#3. Alert Due Date

I normally pay my credit card bills well before they’re due, so I shouldn’t expect to get a reminder for payment deadline from my card issuer. But, on the one occasion that I forgot to make the payment – more on that in Credit Where Credit Is Due – HSBC Case Study – I didn’t get any alert from the bank. Therefore, I’m assuming that issuing reminders is not an industry practice du jour. It should become one. By sending an alert a couple of days before the due date, banks can assuage the common anxiety many people have of incurring hefty fees if they forget to pay the bill on time.

#4. Make Redemption Frictionless

Page 1 of 2 | Next page