Common credit card marketing tricks to bait consumers into debt | Schwartz Bankruptcy Law Center (2024)

FAQs

What marketing tactics does the credit card industry use to trick people into getting into debt? ›

Introductory low APR rates– One of the most common credit card tricks is to lure new customers in with low APR rates that eventually increase significantly after you've created a purchase history and habit of use. Low interest rates often carry with them hidden fees and high penalties for late payments.

Credit card companies use a mix of bonuses, loyalty-building strategies, tailored rewards, digital tools, educational content, and social media to market their products to young adults.

Credit card companies employ tactics like sending checks in the mail, encouraging you to use them. But these checks are treated just like cash advances. Taking a cash advance is dangerous because you start to accrue interest immediately, unlike regular credit card purchases.

When your credit card bill arrives, you either choose to make just the minimum payment or it is all you can afford to pay at the time. You figure you'll pay off the rest when your finances improve. Soon, you're in the trap of pulling out your card whenever you want to purchase something beyond your budget.

Typically, with the 15/3 credit card method, you pay half of your credit card statement balance 15 days before the due date, and then make another payment three days before the due date on your statement. Learn more about this technique here.

A credit card represents access to real purchasing power, but without tangible funds in hand, it's easy for cardholders to spend beyond their means. Overspending is one of the fastest ways to build a debt load that doesn't match your income.

They are power, positioning, performance, and politeness. And they are all based on perception. The first "P" is power. The more power and influence that a person perceives that you have, whether real or not, the more likely it is that that person will be persuaded by you to do the things you want them to do.

Pathos. Most simply, pathos is the appeal to our human emotions. We're more often moved by our emotions than by logic or common sense, so pathos is a powerful mode of persuasion.

Some psychology studies suggest that the most effective persuasion technique is “reciprocity,” which involves giving something to the person you want to persuade in order to create a feeling of obligation.

Credit card companies have many ways to find potential clients, including email or content marketing, social media campaigns, and asking for referrals. The key to finding new clients is understanding your audience and who fits your target market best.

What is the credit card algorithm? ›

The Luhn Algorithm—also known as the “Modulus 10 Algorithm”—is a formula that is used to determine whether the identification number provided by a user is accurate. The formula is widely used in validating credit card numbers, as well as other number sequences such as government Social Security Numbers (SSNs).

The snowball method focuses your repayment efforts on your smallest debts, regardless of your interest rates. With this strategy, you'll rank what you owe from the smallest balance to the largest. Then, pay the minimum amount each month on all debts, but focus the majority of your efforts on that smallest account.

Masked Credit Card is a feature that allows you to create disposable credit card numbers to use instead of your personal credit card information.

Credit card vaulting securely saves credit card information so that charges can be made without entering the card information again.

Key Takeaways

A credit sweep is an arrangement between a bank and customer whereby any excess funds in an account can be used to pay down the customer's debt. This type of arrangement is set up automatically and helps customers reduce their costs paid through interest on outstanding debt.

The credit industry uses tactics like zero interest or 1.5% cash back to trick people into going to debt. They also flash incentives like airline mile points or other rewards points to get people to want to use their credit card.

Incentives, such as 0% interest and 1.5% cash back, are examples of marketing tactics used to get customers to use credit. Furthermore, an introductory offer may be used to entice consumers to use a credit card. However, a 50% off sale is not a marketing tactic to get customers to use credit.

If you carry credit card debt from month to month, you may feel trapped. After all, credit cards generally come with high interest rates, and when you make minimum payments on these accounts, it can seem like little of the money you pay is going toward the principal balance.

If you make a minimum payment, minus the interest, the balance barely goes down. The next thing you know is the credit card company is raising the limit so you can charge more and go deeper into debt.