Getting carded

Credit cards have problems – people who use them spend more than if they’d paid cash because they don’t perceive credit as costing the same amount (even though it costs more, if you carry a balance). And because issuers have incentives to compete on rewards rather than simple price, it’s difficult to compare cards because they differ on so many metrics, as my colleague Adam Levitin has documented.

Other cards also pose problems of understanding the terms. Gift cards expire over time and have other limits, sometimes according to terms that cross the line into deception. And now BusinessWeek reports on similar problems with prepaid phone cards that promise large numbers of minutes, then cut back using difficult-to-comprehend and un- or underdisclosed rules, and apparently sometimes outright failure to honor terms. There’s an ongoing false advertising case between competitors, and a consumer class action was settled with refunds and improved disclosures, but the FTC is just “monitoring” the situation.

Thanks to Eric Goldman for the link.