Sweet Talk to Promote Pay Up
By Alicia Orr Suman
When you have deadbeats on your file, the typical reaction is to send them increasingly nasty notes to scare them into paying. The strategy is to put a little fear into these late-payers, make them squirm a bit, and hope they figure out some way to pay you what they owe.
Sometimes it works, sometimes it doesn't. Your letters and calls might be ignored, or the worst-case scenario may happen: Some of these folks may file for bankruptcy, and you'll never get paid.
But some smart credit card marketers are using a kinder, gentler approach to collections. From the May 17 edition of The Wall Street Journal: "Please know that at Discover Card, we understand life's unexpected detours and are dedicated to serving you in any way we can."
The sympathetic words were not written in a letter but in a Hallmark greeting card with a pretty picture of a babbling brook on the front.
Discover started mailing the greeting card collection letters two years ago and has seen a huge lift in response when it sent the cards instead of traditional collections letters.
Discover's not alone in the move to soften dunning letters; Hallmark is working with two other credit card companies. Other banks are working the 'nice' angle, too: Bank of America sends late-payers to a Web site where they can explain why they're late and work out a payment plan.
All the kindly worded notes and friendly customer service sounds like loyalty marketing, as much as bill collecting, to me. This approach has the potential to give the credit card companies a double pay-off. Consider that credit card companies had to write off 6.3 percent of their loans last year, according to SMR Research Corp., the Journal reported. This is unsecured debt, so when a customer files for bankruptcy, there goes any chance for recouping that loss. Work with the customer, and your chance of saving some of that money increases.