If you were the Chief Executive Officer (CEO) of a credit card company, what would your ideal customer be? As a parent do you want your kid to be the ideal customer?
The CEO’s responsibility is to guide the company into the direction of increasing profits for their company. With that approach, the ideal customer would be the customer that generates the most profit for my company. Remember, the avenues in which credit card companies make money are through: transaction fees, card holder fees, and interest on a credit card balance.
The ideal customer is not the person who pays their credit card bill off every month and on time. The credit card company is only making a small percentage of profit off this customer because of the rewards earned, and the overhead cost that comes with keeping a customer (i.e making sure that you have a customer representative, mail, etc). The ideal customer would be someone who has a credit card balance between 4,000-7,000 dollars. There needs to be a balance high enough that the credit card companies are generating profit. However, not to high in which the credit card holder will default on and never pay back. Additionally, the national average of credit card debt is in this range. The person will also charge between 1,500-3,500 dollars a month to generate transaction fees for the card company. Next, the CEO would like for you to experience some type of fee(s) during the year. One or two would be great because there will be a late fee charged but not too many because they do not want their card holders to get frustrated and quit using the card.
The CEO wants their customers to be happy. Credit card companies have gone through great expense to condition their customers to enjoy using their product even though a large portion of their customers are in debt because of it. People enjoy pulling out their cool looking credit card and hand it to the cashier. The sound of the bell when the purchase goes through. The feeling of getting your merchandise/purchase now and not waiting to save for it.
Lastly, and most importantly, the feeling that you get when you redeem your credit card points. Even though the customer may have given the company 1,000 dollars in interest and in fees this year, but are happy to collect their 100 dollars or gifts. The CEO needs you to be happy so you can be a brand ambassador and spread the excitement of my credit card to your circle of people. The CEO is hoping that by telling your friends and family they will apply for a credit card as well. The CEO does not want the card holder to go around and bad talk the card because now they are hurting the brand of the card. Additionally, the last thing the CEO wants is a card holder who pays in full each month, never late, and uses cash for most of their purchases because there is little profit to be made. The CEO wants someone with credit card debt, who charges a good amount of money per month, while picking up a fee every now and then, and happy with their credit card. That is the person the CEO is looking for and I DO NOT WANT MY CHILDREN TO BE THAT CUSTOMER.
How to teach your kids about Credit Cards.
I have created an in-depth credit card lesson for you to teach your children on how to manage a credit card. Accordingly to Kiplinger, 50% or more parents pay at least one bill for their adult children. If you do not teach them today, you might be paying later. To access my credit card lesson please click HERE.