The increasingly worsening economic situation is forcing many Americans to trim down expenses and maximize savings. In the same manner, card companies and banks are looking forward to scale back unwanted expenses and maximize revenues. Unfortunately, the need to cut back on expenses can mean kicking out some cardholders that card issuers may consider to be liabilities, analysts say.
Industry experts point out that increasing losses are making many card issuers wary about the purchases made by their clients. These card firms often scrutinize the purchases and transactions made by cardholders to assess whether they represent a risk or not. In fact, many banks and card companies have even resorted to clandestine psychological analysis to determine if cardholders are on the brink of financial disaster. Anticipating any problems is crucial for card issuer to take decisive actions like slashing credit limits or worse, closing down card accounts.
Credit analysts say that there are certain types of purchases or services that card companies often watch out for. Any of these can raise the red flag and indicate the probability of a consumer facing financial difficulties in the near future. Card firms then take this as a cue to cut their losses and get rid of "high risk" clients.
To avoid being considered as liabilities, American cardholders should avoid charging several items or purchases to their plastic. Knowing the exact things card companies are looking for can go a long way in helping cardholders avoid being tagged as risks.
For instance, consumers must avoid paying for traffic tickets using credit cards. Doing so can indicate that a cardholder is reckless. Furthermore, traffic violations can push insurance premiums, leading to higher expenses. Studies have also shown that cardholders who have charge traffic tickets to plastic often default on their cards.
Even simple things like paying for retreading services using credit cards can send warning signals to card issuers. Any form of cost-cutting can indicate trouble, leading many card firms to resort to tougher measures. Switching to markets with low-priced items can also send the wrong signal to card issuers that a consumer is trying to cut back on expenses and is thus unable to fully settle his or her monthly dues.
Experts also advise against paying for therapy or marriage counseling using credit cards. Doing so can convince card companies that something is wrong. In most cases, financial problems are often the major cause of marriage problems.
Lastly, cardholders must never charge lottery tickets to their credit cards. Paying for gambling using plastic is a big no-no because gambling is often considered as a form of escapism by many card companies.