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Cash is King? Not with some Companies.

November 24, 2008

An insurance saleswoman came by last week to try and sell me a savings plan. Seeing that she’s fresh out of college and new to the job, I wanted to be supportive but I had a bigger reason to see her. I wanted to see if the economic crisis had changed the way companies do business, especially in the aftermath of AIG.

So Jessica (not her real name) spent 10 minutes explaining her product to me. After that she took my questions. I thought she handled herself very well. I’ll think about it, I said. Then I asked her my parting question:

Me: “So if I am interested, how do I pay for this?”

Jessica: “We deduct your credit card every 6 or 12 months.”

M: “Ummm… what if I want to pay cash?”

J: “Sorry sir, we don’t accept cash. Only credit card.”

M: “How about check?”

J: “No. Only credit card.”

M: “What if I tell you I have no credit card?”

J: (Surprised look on her face) “Then I have to ask my boss how to accept your payment. But I’m sorry that our rules don’t allow cash.”

M: “That’s okay. Talk to your boss and email me if you have an answer.”

So there you have it. A business that actually says no to cash.

There’s a logic to it. When it comes to multi-year installments, standing orders are a much more reliable form of collection but there’s a price. They give up people like me who have cards but won’t use them unless its a life and death situation (my cards are all foreign-issued anyway so billing gets tricky). They lose people with money but don’t qualify for a card like small traders. More critically, they lose customers who struggle with their cards in difficult times.

So, it looks like business has not changed for these companies. They ignore reports of a massive credit crunch happening around the world and continue to assume that their customers’ cards will good over the course of the contract. An excerpt from Credit Karma Blog on the credit crunch:

– 34 % of consumers are closer to their credit limit than they were a year ago.

– 45 % of consumers surveyed have used their credit card less in the last three months, looking for non credit payment options instead.

Citizen Economist also weighs in with the credit crunch at American Express.

When joblessness rise, credit card companies can start reducing your credit line or even canceling your accounts if you’re high risk, like if you’ve been paying minimum amounts every month. Cash flow from these credit card deductions may drop. In a prolonged recession, it could dry up altogether.

So these insurance companies pin their fortunes on credit-card companies that are fast losing trust in their clients and expect me to believe they can meet their bonus payments to me? Umm…. try again.

Anway, since my cash is not good enough for them, I’d have to say thanks but no thanks.

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3 Comments leave one →
  1. November 24, 2008 9:35 am

    The problem with some companies is that they don’t think far. By limiting the payment option for potential customers, they are actually chasing away the people who are willing to give their businesses a chance. In a volatile economy like the one we having now, it’s better to take what you can get by offering as many type of options as possible.

    A company which doesn’t allow cash = a company which only allows cash = limited option. If you limit my option, then I will just have to go elsewhere, somewhere i can use whatever payment option that I feel is suitable.

    Yeah, companies that adopt a “take it or leave it” approach at times like this may find more people leaving it than taking it. 😀

  2. November 24, 2008 2:35 pm

    Yes, banks always limit the payment options. If you get a home loan from some banks, they have a prerequisite that you have to open and maintain a savings account with them.

    The installment is then deducted from the account. They do not accept any other forms of payment be it cash or check.

    Reason why? To boost their number of depositers!

    I wouldn’t mind having a bank account because its an interest-bearing asset. A credit card is a liability that charges me interest which I don’t need at this time. It wouldn’t be so bad if these insurance co’s allow direct debit from a bank account but they don’t, so too bad for them.

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