Complexity and Unfairness
Pricing schedules for services are often quite complex. Changing circumstances sometimes result in complicated pricing schedules that are difficult for consumers to interpret. Consider the credit card industry Traditionally, the banks that issue these cards received revenues from two sources: a small percentage of the value of each transaction (paid by the merchant). and high interest charges on credit balances. As credit cards became more popular, costs started to rise for the banks on two fronts. First, more customers defaulted on their balances, leading to a big increase in bad debts. Second, as competition increased between banks, marketing expenses rose and gold and platinum cards started offering more affluent customers features like free travel insurance, emergency card replacement, and points redeemable for air miles. But as marketing expenses were rising, more customers started to pay off their monthly balances in full and competition led to lower interest rates, resulting in lower revenues. So the banks increased other charges and i new fees that were often confusing to customers. Details of charges by one major bank for its platinum card are shown in the box entitled "Charges, Fees and Terms for a Platinum Visa Card
Complexity and Unfairness Pricing schedules for services are often quite complex. Changing circumstances sometimes result in complicated pricing schedules that are difficult for consumers to interpret. Consider the credit card industry Traditionally, the banks that issue these cards received revenues from two sources: a small percentage of the value of each transaction (paid by the merchant). and high interest charges on credit balances. As credit cards became more popular, costs started to rise for the banks on two fronts. First, more customers defaulted on their balances, leading to a big increase in bad debts. Second, as competition increased between banks, marketing expenses rose and gold and platinum cards started offering more affluent customers features like free travel insurance, emergency card replacement, and points redeemable for air miles. But as marketing expenses were rising, more customers started to pay off their monthly balances in full and competition led to lower interest rates, resulting in lower revenues. So the banks increased other charges and i new fees that were often confusing to customers. Details of charges by one major bank for its platinum card are shown in the box entitled "Charges, Fees and Terms for a Platinum Visa Card
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