Bob Sullivan is the author of the book Gotcha Capitalism in which he wrote about the many ways businesses trip up the consumers with small-print fees. I like Bob Sullivan. I reviewed and recommended his book. But sometimes, his consumer advocacy also becomes much ado about nothing. A recent example is his post Chase dumping former WaMu card holders.
Chase took over Washington Mutual (WaMu) last year. Customers who had bank accounts and/or credit cards with WaMu became Chase customers. Chase had a review of the accounts they took over. They decided to close some of the credit card accounts they inherited from the WaMu portfolio. What’s wrong with that?
Customers complain that they shouldn’t have their credit card accounts closed, because they have always paid on time. Paying on time is a necessary condition for having a credit card. It’s not a sufficient condition. Having a credit card open is not a God-given right.
It’s a two-way street. A consumer decides which cards they want and keep. A credit card company decides which customers they want and keep. For the closed accounts with a balance, Chase is not demanding full, immediate repayment. People can still take their sweet time to pay the minimum payment every month. They just can’t charge more on the cards.
A consumer can decide to apply for a credit card, use the card a few times, grab the signing bonus, never use it again, and cancel it when the annual fee kicks in the next year. A credit card customer can also decide to only use the card for the special categories with the highest rebate. 5% on gas. No amount of merchant fees will cover for that. If the customer does not carry a balance, it’s a guaranteed loss to the credit card companies on those transactions. It’s all fair game.
When a customer carries a balance, they can decide to pay it down at any point of time, or borrow more at any point of time. No advance notice or approval is required. Compare that to a traditional loan, which is one-way: you borrow up front; you can pay it down but you can’t borrow more unless you make a new application.
What if the customer had a job when they applied for the card but they don’t have a job when they borrow? The credit card company still has to let them borrow. Why shouldn’t a credit card company be able to decide whether they want to keep anybody as a customer?
There are laws against discrimination based on race, gender, religion, etc. Short of those, I honestly don’t see what’s wrong with a company not wanting to keep some customers. It doesn’t matter if the affected customers have good credit history or not. If they don’t want you, they don’t want you. Just like a consumer can decide they don’t want a particular card because they don’t like the color of the card, it doesn’t matter how great the card is otherwise.
It’s a two-way street. You take your picks. They take their picks. End of story. If one company doesn’t want you, there are other companies to choose from. Move on. If nobody wants you, well, that tells you something.
Instant diversification in a low-cost ETF portfolio. Convenient and disciplined with automatic rebalancing. Minimize your taxes. Betterment.com.