Actual Comments From A Former Credit Card Company CEO:

Normally I have an inspirational personal story. This month, however, I found something that I thought was very important. Please read on!!

Here are some comments from Shailesh Mehta in a recent interview on an American news show called Dateline. Why should you care what he says? You should care because he used to be the CEO of Providian Credit Cards. Providian is in the top five credit card lenders in the USA and has 12,000 employees.

I have taken out some of the best comments from his interview. He basically admits that credit cards are extraordinarily profitable but also extremely hard for the average consumer to understand.

Plus he admits that they don’t want you to pay back you credit card on time.

Reporter: Right. And by allowing them to make 2 percent minimum payments, your hope was to keep them paying basically in perpetuity, right? You never wanted them to really pay it off.
Shailesh Mehta: Yeah. If they make the minimum payment, yes, then that loan will take almost 20 years to pay back. Absolutely.

Reporter: And you make more money then.
Shailesh Mehta: We make more money.

And, of course, this was something that was criticized later on by some consumer advocates - and understandably - that, "Why would you put this monthly payment so low? You should increase the monthly payment and have the loan amortized faster." And that could have been done. The question is that we say it's a minimum payment, not a recommended payment.

Reporter: Well, the criticism is that it's exploiting the customer, the fact that they don't really understand what's going to happen (with there credit card payments).
Shailesh Mehta: In a way, I will say yes. In a way, the pricing was designed that it will require a degree of some sort to understand how many different ways I'm paying and what I'm paying. So industry profit did go up.

Reporter: Now, when you get solicitations (credit card offers) today in the mail, what do they tell you?
Shailesh Mehta:..I haven't applied for credit cards for I don't know how many years. I don't need one. But I do look at the solicitations.

Reporter: You get them in your mailbox?
Shailesh Mehta: I get them in my mailbox, and I get from the mailbox [from] companies I already have a credit card with. (Laughs.) So it's surprising how their system works.

But I always saw the deterioration in the way the stealth pricing, the penalty pricing kept rising. And I said, "My God, who is going to understand all this thing?" I mean, borrow on a credit card, nobody knows what the real cost is. Higher and higher late fees and over-limit fees.

Reporter: By the way, how profitable was Providian?
Shailesh Mehta: Providian was very profitable until the day I left. In the quarter that I left, despite all the hoopla, I still made over $180 million quarterly profit.

Reporter: Almost a billion dollars a year.
Shailesh Mehta: We were making a billion dollars a year.

Reporter: In profit.
Shailesh Mehta: In profit, before tax.

Reporter: And what kind of interest were you charging?
Shailesh Mehta: We were charging 21.9 percent interest.

Also later in the interview he goes on to give a couple of other interesting opinions about credit cards:

“Your average consumer is not going to be able to translate to what the real pricing is, OK?”
“Lending money to people is never a difficult, OK? People will take money if you're willing to give [it to] them.”
“We're not going to target the people who pay their monthly bills in full.”

As you can see credit cards are there to fool you not help you.