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I'll talk about the interview later..

So anyway, about that..

What people don't seem to grasp is that the revenue from late charges doesn't go straight into big profit jugs. It goes to offset costs, which include the cost of running accounts, fraud, and bad debt. It's bad debt, specifically, that I thought I should point out:

You see, people run up huge debts and can't pay it off - at that point, the debt becomes our problem, and is a loss to the business. In order to offset the (rising) cost of bad debt, interest rates go up, and charges are applied to accounts. I've seen the internal marketing information, I know that we don't do this for profit - we do this so that we can break even at the end of the year.

One way in which we offset bad debt is to profile customers, and raise their interest rates appropriately when they enter riskier categories. Which is a good way to do it, because we penalise those customers who are more likely to cost us in the long run. Arguments about interest causing bad debt are misguided - on the whole, it tends to be peoples' behaviour that prompts it, either through irresponsibility or downright recklessness.

And yes, another way in which we offset the cost of bad debt is to charge people £20 every time they make a payment late, or go over their credit limit. It's also our policy to refund that charge if it's a first offence, or if there's a good reason (i.e. a day late because the branch was busy one lunchtime, etc. etc.). While the automated policy is quite harsh, if customers ring up to ask nicely if we can remove the charge, we do.

And the reason those charges go on is because customers who tend to go over their credit limits, or who don't make payments, are the customers who end up costing us more in the long run. I mean, for example, right now approximately 5% of our customers are in arrears. So in effect, late charges generate revenue worth approximately £1 per customer on the book. And as I've said, this money is used to offset the customers who 'go bad'.

Now, should we bill all our customers an additional £1 per month? Or should we bill £20 to the 5% of customers who break the rules?

Like I said, we're not churning out massive profits in Card Ops - these charges are to break even, and if that means billing the people who screw up rather than billing everybody, then so be it.

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I'm bored. Mention your interview. kthxbye.

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