Lenders Begin 'Fishing' for New Clients with Enticing No-Interest Lure (V) (C) (JPM)
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Credit-card companies are on watch Tuesday as firms look to lure in new customers with old playbook trick.
The WSJ today said that Visa (NYSE: V), Discover (NYSE: DFS), JPMorgan Chase (NYSE: JPM), Citi (NYSE: C), and others are periodically sending out offers for zero-percent balance transfers. What the offers do is allow customers to transfer balances from other credit-card companies and not pay any interest for up to two years. There is generally a fee -- usually three percent -- for the balance transfer.
Due to the U.S. consumer still weary of taking on new debt, the current offers being made cover an unusually long period of time.
It wasn't made clear whether MasterCard (NYSE: MA) and Capital One (NYSE: COF) were also sending out promotions.
The goal for the companies is to bulk up loan portfolios, many of which are depleted following the financial crisis in 2008 - 09 as firms restricted credit and wrote-off bad debt.
With no interest being charged, the firms hope consumers will begin racking up interest-bearing charges before the promotional period ends. The institutions might also be hoping to draw long-term clients out of the deal, cross-promoting other cards, loans, and, in some cases, savings accounts in the process.
Historically, banks found that many utilizing the zero-percent promotion don't go out and spend as much as the firms hoped, if anything at all. That just leaves the banks with the balance transfer fee as the sole source of new revenue.
Visa, MasterCard, and others are lower early Tuesday.
The WSJ today said that Visa (NYSE: V), Discover (NYSE: DFS), JPMorgan Chase (NYSE: JPM), Citi (NYSE: C), and others are periodically sending out offers for zero-percent balance transfers. What the offers do is allow customers to transfer balances from other credit-card companies and not pay any interest for up to two years. There is generally a fee -- usually three percent -- for the balance transfer.
Due to the U.S. consumer still weary of taking on new debt, the current offers being made cover an unusually long period of time.
It wasn't made clear whether MasterCard (NYSE: MA) and Capital One (NYSE: COF) were also sending out promotions.
The goal for the companies is to bulk up loan portfolios, many of which are depleted following the financial crisis in 2008 - 09 as firms restricted credit and wrote-off bad debt.
With no interest being charged, the firms hope consumers will begin racking up interest-bearing charges before the promotional period ends. The institutions might also be hoping to draw long-term clients out of the deal, cross-promoting other cards, loans, and, in some cases, savings accounts in the process.
Historically, banks found that many utilizing the zero-percent promotion don't go out and spend as much as the firms hoped, if anything at all. That just leaves the banks with the balance transfer fee as the sole source of new revenue.
Visa, MasterCard, and others are lower early Tuesday.
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