Friday, December 7, 2012

Transparency, no -- people might know they're being screwed

By way of Money Science, I had to read this twice just to believe I hadn't misread it. The argument is that transaction charges on credit cards should NOT be transparent to the customer because the customer might then feel cheated, become angry and upset, etc. Better if those charges were lumped into the bulk price of the purchase so the buyer won't know what the bank is charging. Don't upset people with things like this:
...the card operators and issuers are ripping off customers by taking percentage fees opaquely.  These fees are applied throughout the process, and the lack of visibility of charging means that customers don’t know they’re being ripped off.
The solution: more transparency.
Now I can see the argument and solution rationale, but I fundamentally disagree with it.
The reason I disagree is that customers are not rational when it comes to money.
They will happily pay fees to ATM operators, currency exchanges, PayPal and more if it is convenient and supports instant gratification.
I should know, as I’m one of them.
Do I count the fees and the breakdown of costs for every transaction?
Do I object when I see the cost of a transaction?
Take the example of booking an airline ticket and you see that there is £4.50 ($6) charge for booking the ticket using a credit card.
Do we get upset with the airline?
Are we pissed off with the card company and the bank?
Or take the example of my own bank who recently started itemising cross-border transactions with the charge per transaction.
Do I appreciate the transparency?
Do I object to the fee per transaction?
Of course I do.
In other words, customers would far rather prefer everything bundled into one charge where the bank fees are hidden, rather than seeing the fees per transaction itemised explicitly.

Uh, no, actually, I'd rather see the fees made explicit. That way I think the company charging the fee might think twice about my reaction to it. What do others think?