Written by: Nick Bregozzo

Interest is the cost of money. It stands to reason therefore that one would want to try to reduce as much interest as they can in order to save money.

On the other hand banks want to make as much money as they can for their shareholders for this reason it is within their best interests to charge as much interest as they can in order to maximise profits and satisfy the needs of their shareholders

In order to bridge this gap clever marketing exists to provide consumers with a belief that the more interest they pay the more benefit they have. Banks will offer increased points, benefits, and memberships to exclusive clubs in the perception of value in order to justify charging a higher interest rate.

Through clever marketing the consumer will feel that their credit card although it is more expensive than other credit cards provides them with a superior product that lowest interest-bearing credit card.

The reality is when it comes to credit cards no one card in terms of its usage is actually better than the next.

All credit cards exist to facilitate a convenient purchase. That is to say that whether or not you have a credit card that is gold or platinum with memberships to frequent flyer clubs or alternatively a credit card that is a low rate card with no special benefits, you will still be able to rely on that card to make purchases. The only thing separating the cards is a perceived level of value and of course the interest rate.

When it comes to the card that charges lower interest the consumer will not be able to take advantage of ”˜special deals” or special memberships however on the flip side of that consumer with that lower interest-bearing card would potentially have a lesser monthly expense.

It is only through clever marketing that there exists a perception that this lower interest-bearing card is less valuable or less useful than a card with a higher interest rate and access to points and memberships.

Marketing companies through their research have realised that the colour of the card plays into whether or not there is a perceived value. A beige coloured card for instance is less valuable that a platinum card or a gold card. Similarly a red card may inspire increased spending.

Credit card commercials often feature well-known celebrities and movie stars. The theory behind this of course, is if we see George Clooney using an American Express card or MasterCard wheat to will want to use that card in order to appeal more like our idle.

Another popular approach by marketing companies to sell credit cards is emphasising the convenience of the card. For instance, a commercial may feature an everyday man overseas in an exciting country having just had an accident, has no cash in his wallet, reaching for his trusty credit card in order to save the day.

Consumers need to relate to a product in order to see value in that product. When it comes to credit card companies marketing their product there is no greater truth.

It is quite no accident that we see the highest interest-bearing cards feature in commercials with high production value. On the other side of the spectrum marketeers have recognised that a portion of consumers who are price conscious will only purchase a credit card if there is a belief that it will actually save them money.

In achieving this, banks have introduced terms such as low rate credit, no fee, balance transfer and special introduction offers. But there is always a catch. Unwitting consumers Lord by banks to take on low interest-bearing cards with promises of honeymoon periods and 0% transfers only to find themselves slugged with higher than average interest once those honeymoon periods come to therein inevitable conclusion.

Such cards tempt consumers to regain control of their financial situation by swapping card that they have for a lesser interest-bearing card. In reality what often happens is the consumer will transfer their card from their high interest-bearing card to a lower interest-bearing card and in the process not cancel the first card. For a lot of people this translates to a feeling of artificial wealth resulting in the consumer becoming over indebted.

There is no bigger irony than a consumer seeking to find savings or attempting to address their indebtedness only to become further in debt.

In concert work with this there is no bigger truth than relying on debt to solve a debt crisis only serves to increase indebtedness.

When it comes to credit cards taking on those exclusive credit card offers or swapping your current credit card for a no annual fee credit card or 30% special offer credit card is the same as swapping bad debt for different bad debt.

If you’re looking for a new credit card this is my advice:

1. Ask yourself whether or not you really need a credit card

2. If the answer is yes be prepared to factor in an interest rate into every purchase you make using that card.

3. Be prepared to pay a few credit cards at the end of every month.

4. When you go shopping leave a credit card at home in order to avoid spontaneous impulsive spending.

5. Become impervious to clever marketing.