To compete with specialized financial institutions, banks offer some of their customer’s payment cards that include a revolving credit option. Like all credits, those linked to cards must be used with care.
After collecting new bank card from concerned branch customers uses it to pay for their purchases at the supermarket in neighborhood. At the cash register, she discovers, surprised, that the terminal offers her two payment options: “cash” or “on credit”. Since her card is with deferred debit, she thinks that it is a question of choosing between immediate payment and payment at the end of the month. She therefore selects “payment on credit”. Mistake! Without knowing it, she has just activated the revolving credit that she had taken out with her establishment a few years earlier. Like many customers, Pascale was, in fact, given a payment credit card processing companies with a revolving credit option.
Banking establishments have offered this type of credit to their customers for many years. They often call it “money reserve” or “cash advance”. But, recently, the banks have revised their marketing offer. They distribute these credits with a card which facilitates their use. In some establishments, it is a payment card with a credit option. Hence the risk of confusion. With such a card, each time money is withdrawn from an ATM or each payment, the customer can choose the credit payment option. In this case, it draws on a “reserve” of credit. He is then free to reimburse the balance used immediately, so as not to incur interest, or in several months.
Banks have launched these new offers to try to compete with companies specializing in revolving credit (Cofinoga, Sofinco, Finaref, etc.). Since the early 2000s, they have run very aggressive promotional campaigns with consumers and have seen their market shares increase sharply. Individuals wishing to obtain revolving credit are naturally led to favor the services of these establishments rather than those of their bank. Too bad, because by pushing the door of their agency, they could easily get better conditions and a more attractive rate. “The revolving bank credits have rates which oscillate on average between 13 and 17%,is considerably cheaper than those sold by specialized establishments which are still flirting with wear rates around 19% ”, analyzes Denis Cotte, founder of the site moncreditpropre.com.
No Credit Card Without Prior Subscription To A Contract
However, a bank does not have the right to impose a credit card on its customers. The Lagarde law, which entered into force on May 1, 2011, has, in fact, particularly regulated the distribution of revolving credit (whether by banks or specialized credit organizations). Customers must sign a series of documents indicating that they understand how this loan works, that they have been informed of the maximum amount of the line of credit available to them, the proposed rate grid, the repayment method, etc. In principle, it is impossible to obtain a credit card if one has not applied for it. “These cards are a supplement to revolving credit, a client can only hold one if he has opened a revolving credit line with his advisor,” recalls François Rabat,Credit savings manager at Crédit du Nord.