Consumers this month have been cutting up their credit cards for Bank Transfer Day. At the same time, several of the largest credit card banks are in the middle of the biggest marketing push to sign up new customers for credit cards. When you hear this, it almost sounds as if credit cards are a good deal for banks and a bad deal for consumers.
But wait a minute. Just last year the banking industry was screaming about how much money they would be losing on credit cards after the new rules went into effect.
These banks involved in this reversal of strategy either were wrong last year when they imagined that credit cards would become a money-losing business, or are wrong now to spend around a billion dollars to sign up 2 or 3 million new cardholders.
The worrisome thing about the new credit card rush is that the economic forecasts it is based on might be mistaken. The banks are particularly eager to sign up new cardholders now because they imagine the economy and job market will have to improve soon. The most eager adopters of this fall’s credit cards will be using them on the same theory. It is the same error, of course, that created the home mortgage mess six years ago. Maybe the economy will be booming again next year. But if it is not, the consumers and banks who make a move into credit cards now may just be creating the next credit mess.