Why is it normal for banks to issue cards without showing their terms first?

[Anonymous]

Also, in some sense the card substitution is just an obvious case of the slightly more subtle card nerfing.    Why doesn't the same arguement apply if a card is nerfed (up to some max period after application)?  I took an AAoA hit based on the expectation that the card would give me X rewards, and now it gives me X/2, and I wouldn't have applied had I known.  Take it off my CR!

Yes, the T&Cs indicate that the program can change at any time, but apparently that isn't enough....

[Aahz]

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@Anonymous wrote:

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@Aahz wrote:

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@Anonymous wrote:

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@Anonymous wrote:

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You keep repeating the same point... How you view this practice depends on your perspective I suppose. As I have said before it is still a poor business practice. 

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No one said it isn't a poor practice.  It's just that it's disclosed up front so there's no reason to cry over spilled milk.

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I'll say it's not a poor practice!

Evidence that it IS a poor business practice - a few irritated credit junkies (who likely generate little, if any, profit for the businesses following the practice.

Evidence that it ISN'T a poor business practice - billions of dollars in profits for the businesses following the practice.

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Evidence that it IS a poor practice - people closing their accounts 

Evidence that it IS a poor practice - people who don't use the account because they did not get the reward structure that they wanted. 

Evidence that it IS a poor practice - Chase Bank has made billions of dollars in profits and they do NOT follow this practice... and in fact Chase made way more than BOA. 

Your argument that it is making more in profit really has no credence. 

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The dozens of people you refer to in your first two points are far outwighed by the thousands of people who use the cards.

As for your third point - Really?  Chase gives you the full terms (starting CL & APR per your OP) and allows you to back out before opening the account?  Since when?

[Aahz]

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@Anonymous wrote:

and in fact Chase made way more than BOA. 

Your argument that it is making more in profit really has no credence. 

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The most recent numbers I could find quickly are from 2013, but they show Chase's Credit Card Yield at 10.79% with BofA at 10.71% and US Bank at 10.17%.

Not exactly a huge different when you're just talking about their credit card profits.

Source

[Anonymous]

I'm not sure credit junkies versus normal people works as some claim it works. A normal person, precisely because they're not an expert on credit, might end up being denied two credit cards in a row and then get a third completely unusable one (tiny limit, bad terms, etc.). Sometimes people have a semi-urgent need for credit without anything nefarious going on (cash flow plug required) and run into something like this. 

Bad business practice or not, it's definitely not consumer friendly. And by the way, in plenty of countries outside of The United States, things don't work that way. So banks make it work in different ways too. I personally find it absurd on its face that applying for a particular product opens you up to getting different terms or a different product alltogether shoved down your throat.

[Anonymous]

If your profile/score supports a particular product, 99% of the time you'll get exactly what you want.  Those that don't get what they want 99% of the time probably possess a profile/score that isn't good enough for that product on the desired terms.  So who is at "fault" here really?  As I said on the last page, if people would hold off (many times just 6 months or less) on apping and garden to allow their profiles/scores to strengthen a little to get them "off the cusp" and further in to the green zone they'd be in a stronger position to be satisfied with the result.

I think very few people with "excellent" (say 750+) scores would ever waste their time with this "poor business practice" argument since they very rarely would have to worry about the fine print in the terms and conditions.  Everyone else needs to understand that the more risk their profile presents, the more risk they take in having to face the fine print following an application.

[Anonymous]

I think it's far less of an exact science than you make it out to be. I am hearing about penty anomalies. Surprisingly low scores getting a good deal and limit, and very nice scores getting a bit of a raw deal (given the score).

[kdm31091]

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@Anonymous wrote:

I think it's far less of an exact science than you make it out to be. I am hearing about penty anomalies. Surprisingly low scores getting a good deal and limit, and very nice scores getting a bit of a raw deal (given the score).

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Every bank has different standards, and even has different standards for various products. For example, the Citi Double Cash card tends (there are exceptions) to give limits and APRs that are worse than one would expect given their score. A lot of people with very good credit get 1-3k limits and 21% APRs or something similar. Presumably, it's because of the flat 2% rewards. The lower the limit Citi gives you, the less you will be able to reap in rewards. The higher rate allows them to get more profit in interest if you do carry a balance. It's about controlling costs.  It's crappy, yes, but if one's main concerns are a large limit and lower APR, a no frills card would suit them best.

It is not an exact science at all, and everyone's profile is different. We can share approval stats but nobody really knows the other person's full profile, nor do we know 100% of what calculates the limit and APR you recieve. And as I said, it varies from bank to bank and product to product.

I don't think we will ever see the consumer be able to decline a card product if it doesn't meet their needs, simply because "regular" people are not as educated (or just don't care that much) about this stuff. If they got approved, for most people, they will just take the card and use it and be fine with it.

[Anonymous]

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@Aahz wrote:

As for your third point - Really?  Chase gives you the full terms (starting CL & APR per your OP) and allows you to back out before opening the account?  Since when?

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tydawg's real complaint is against card substitution, and I don't think Chase does that.   

[NRB525]

For those who think this is a good idea, offering applicants the ability to decline the card and not open the account, you are free to start your own bank to try it as a market differentiator.

You will, however, have to think through the consequences. If you choose to use this as a market differentiator, then that means you will need to advertise it. "Apply for our buccu rewards card, and if we only offer you the ho-hum rewards card, or if your interest rate will be 13% instead of 12%, or you only qualify for a $300 limit, you have the option to decline."

Who do you suppose is going to flock to your bank, to try their luck at getting the buccu rewards card? Each one of those people will ding your HP cost. Some significant percentage of them won't take the offer, won't do one swipe on the card they decline to open, but will be back in 6 months to try the casino again.

[Anonymous]

"Apply for our buccu rewards card, and if we only offer you the ho-hum rewards card, or if your interest rate will be 13% instead of 12%, or you only qualify for a $300 limit, you have the option to decline."

 
But this is just an example. I think there are people with good to excellent credit scores who get unsatisfactory terms who would happily decline a CC if they could. I think it would be good if it was an industry-wide thing. It would benefit consumers, they could shop around more.. so increase competition between banks. I don't know about specific numbers, so it hard to say whether it would do something like drive annual fees up or not. In any case, other countries do it this way and loans are processed this way, so it's not like it's naive fantasy. As a bank, I would prefer to have happy or content customers, rather than shoving deals down their throat they will dislike. It would really require an analysis. My intuition is that it might be a win-win. If I get a customer who declined 2 other cards elsewhere but comes to me and my risk analysis says that I want this customer, and then give the customer what he wants,.. it sounds like I can make a good profit off this customer.