Monday, February 25, 2008

Beware This Pesky Practice

This article was first sent to Fools as part of our 'The Good, The Bad and The Ugly' email series.
The latest 'ugly' in our 'The Good, The Bad and The Ugly' series is the widespread practice of financial cross-selling.
Essentially, this is when an institution you already use (like a bank or building society) tries to sell you one or more of its other products, such as a credit card or loan.
They try it in person, over the phone or in the post - and often, they don't quite hit the nail on the head...
Here's what happened to me a couple of days ago, when I was posting some parcels at the Post Office. The conversation went something like this:
Me: "I'm posting a few things I've sold on eBay..."
Counter assistant: "Ooh yes - why's that?"
Me: (sheepish grin) "I'm trying to clear my last credit card so I can cut it up!"
Counter assistant: "That's nice... can I interest you in a Post Office credit card?"
This assistant was friendly, patient and helpful.
But she was also clearly under pressure to push that darn card - despite the fact it was completely the wrong product for me.
Almost everyone I know has had similar things happen to them. A friend of mine is regularly pestered by her high street bank, which phones her up with eager requests to 'review her account'.
These 'reviews' quickly turn into enthusiastic offers of more loans, more credit cards and so on.
Such cross-selling 'campaigns' seem to hit me in waves. Whenever I called my bank last year (for example, to cancel a direct debit), I usually spent the last few seconds of the call fending off fervent attempts to sell me a mortgage.
Which was annoying - as I had expressed no interest in buying a house, and had neither the means nor the inclination to do so.
Another friend, who works for a bank, explained that a sellers' 'league table' was pinned up on the wall, with all the glory, shame and financial bonuses that involved.
So what do the banks say?
One press officer at a big bank told me that his employer recommends products that are suitable for you, based on the individual financial profile it has built up.
For example, if your credit rating has recently improved, you could be eligible for some new products.
However, at its worst, I think cross-selling is unethical. In the current economic climate, financial providers are keen to emphasise the importance they place on more responsible borrowing and lending.
But when you're pounced on several times a month by employees waving inappropriate financial products - you begin to wonder just where all this 'responsible lending' is.
Of course, cross-selling is one reason high street branches remain as profitable as they do.
It would be much cheaper for providers to transact most business online, or on the phone - but then you wouldn't get the face-to-face encouragement to buy that dratted PPI...
Anyway, here at The Fool we recommend that you shop around for every financial product you need.
If it turns out two of your best products are with the same provider - then great.
But as I pointed out in Why You Should Cheat On Your Bank, loyalty to a single institution doesn't always make financial sense.
And anyway, pesky, persistent selling techniques undermine my sense of loyalty pretty quickly.
If you really are looking for a credit card, try our credit card comparison centre to get the right one for you.

No comments: