Consumers on New Footing with Banks Consumers have been battered and bruised by the recession, and one of those bruises has been administered by their own financial institutions. Banks have refused to extend credit. They began to reduce people’s credit card balances and often with little notice. The days of generous credit card offers also ended even before the passage of the Credit CARD act which clamped down in credit card fees.
The resentment among consumers has been palpable because many of the ones ‘punished’ did nothing wrong. Now consumers are seeing the tide turn as banks begin to look for ways to entice consumers back. What this means exactly remains to be seen, but many consumers will probably find there will be new ways to reduce fees and maybe even debt.
Banks are developing new marketing strategies that are focused on customer relationships. With the economic recovery beginning to take hold, the full impact of the
Credit CARD Act is beginning to be felt. Before the new legislation was passed, banks could raise fees whenever they wanted or sell risky investments with high interest rates. In addition, many of the customers who were paying higher fees and interest rates because of late payments have either paid off their balances or the balances were eliminated through bankruptcy.
That means banks are also experiencing lower fee collections because more of their customers are creditworthy. What does this mean for many consumers? It means they can take advantage of the new marketing focus of trust building between banks and customers to lower interest rates on credit cards or get fees waived. In other words, the power is returning to the customer and that should be good news for consumers.
Consumers will be enticed to consolidate their bank accounts within a single bank for example. In exchange they will be offered lower fees and rates. Banks will offer special deals on loans and new products too. Because financial institutions cannot raise fees and rates like they used to, they are forced to build business by attracting new customers.
It is ironic that banks are now forced to lure the very people they seemed to disdain during the recession. Lenders have been concerned about the affect of the Credit CARD act on their bottom lines. It is expected that financial institutions will lose billions of dollars in revenue. The long term consequences of this fact are not fully understood yet.
What is known though is that financial institutions must find ways to change the perception held by many consumers that banks are ruthless and only taking care of profits and not customers. The banks incurred a lot of public relations damage over the last two years, and that damage will not be easy to undo.
But the good news is that finally consumers are seeing the possibility of benefitting from the marketplace changes. Bank customers need to learn how to talk to their banks and make sure they are getting the best deal possible, and that can equate to lower monthly expenses. The consumer education president for Credit.com, John Ulzheimer, says that bank customers are going to have to learn how to do a little ‘horse trading.’