Saturday, April 25, 2009

The Credit Card That Comes With Vanilla

President Barack Obama likes vanilla — for credit cards, anyway. In a meeting with bankers this week, he used the idea of vanilla to suggest that bankers had an obligation to offer no-features credit cards first. That is, if they decided to offer a credit card to someone, they should offer the no-features credit card first, and add features only if the cardholder-designate specifically requests them.

For example, if Discover Bank wants you offer you a Discover Card with a Cashback Bonus feature, they first have to offer you one without the Cashback Bonus. So that you can keep your credit card simple if you want to.

This was not just a suggestion, but a provision that Obama seemed to be offering to House Democrats as a possible addition to the credit card reform legislation currently working its way through Congress.

Needless to say, this would completely change the way the credit card business operates. I have held my share of credit cards over the years, but I have only once ever had a bank offer me the choice of a no-features credit card. This must have been some kind of marketing study, because they offered me the choice of six different kinds of cards: one with airline miles, one with cash rebates, one with my choice of a novelty picture, and so on. I picked the one with no features at all, figuring that keeping my credit card dealings as simple as possible would be an advantage to me. It was, but in a way, it was also a bad choice. I found out later that to the bank’s credit card marketing people, a no-features credit card was the equivalent of a big “loser” stamp across the cardholder’s forehead. I guess they figured anyone who had a no-features card was someone was barely scraping by financially and didn’t even make it onto the pre-qualified list for a card with free music. Whatever the rationale, the no-features card got the worst treatment from the bank, and when they decided it was time to start adding fees to their credit card accounts, it was the no-features cards, the ones that cost the bank the least, that got hit with the new higher fees first. If banks think of no-features cardholders as losers, what will they make of a world in which anyone who wants to can have a no-features card just by not asking for anything more? Will the banks start to see half of their credit card customers as losers, or will they adjust to a world of greater consumer choice, in which consumers have a little more say about where they fit in?