Previous Entry Share Next Entry
(no subject)
Consumers presumably expect the world to revolve around them with minimal effort. They don't read credit agreements, they don't pay attention to how much they're charged for things, all because they've made the false assumption that economics works for them. The truth is, economics works for whoever puts the most effort into saving/making money.

The report by the Competition Commission regarding interest rates on store cards makes for interesting reading. My preliminary findings are that it is completely flawed, so I'll try not to spend too much time driving that point home.

Effectively, the entire thing has less internal continuity than a season of The Simpsons. The first quote reads:

"Retailers and store card providers are, we have found, effectively insulated from competitive pressures."

The second reads:

"We are requiring all credit providers, where store card APRs are 25 per cent or above, to include a prominent warning on cardholders' monthly statements that cheaper credit may be available elsewhere"

These are both key points in the report. Now I will say this only once:

If cheaper credit exists elsewhere, this is likely in the form of credit cards. Therefore, the Competition Commission acknowledges that credit cards are a substitute product for store cards, and therefore are in competition with them. Credit card companies are fiercely competitive. The Store Card market therefore cannot possibly be insulated from competition.

The most important thing to take away from this is that the imaginary market for store cards is a myth. The market is one of consumer credit, where financial institutions compete to hold the balances of customers to whom they've offered credit. And in that market, there is definitely competition.


Log in

No account? Create an account