Once upon a time a clever marketer I’ll call Marty came up with the idea that credit cards could offer free points or free airline miles or money back as a way of enticing people like you and me to apply for his particular card. I never met Marty personally, but his plan has certainly taken hold. The only problem is that free isn’t really free.
If I redeem umpteen thousand points for a round-trip airline ticket to Cleveland, somebody has to pay for it. The same goes for the fuschia-colored Cuisinart mega-mixer. Or the your-best-night’s-sleep-ever mattress with matching box spring.
However, Marty isn’t a philanthropist. He doesn’t want to purchase those tickets out of his own pocket and wait until I need to visit Cleveland. Nor does he want to stockpile multi-colored mixers or mattresses. At the same time, consumers seem to love the idea that they’re getting something for nothing.
So Marty hides the costs of the free gifts in a variety of ways. He recoups some money as part of an increase in annual membership fees. He recoups some more in the fees he charges retail merchants who accept his credit card.
On April 1, MasterCard and Visa will start charging merchants more to accept cards that offer “free” incentives than they will charge a merchant to accept a plain old, common card. And what will the merchants most likely do? I predict they will raise their prices accordingly and pass on a little piece of that free airline ticket to Cleveland to every customer. So it seems to me that the word ‘free’ really means “an undetermined cost that is kept a closely guarded secret as it is passed, like a hot potato, from person to person to person.”
Sort of takes the fun out of fuschia.
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