MasterCard’s Machiavellian Twist

Having just spent the last six months or so giving job talks on a paper about why credit cards issuers should allow consumers to precommit to certain levels of spending and borrowing, I am simultaneously excited and disappointed to see MasterCard's latest offering, the "inControl" card, as reported by Aili McConnon in BusinessWeek. I'm excited because it shows beyond a doubt that allowing consumers to set predetermined limits on their spending and borrowing is technologically feasible and perhaps not even that expensive. (McConnon did not discuss the fee structure for the new product.)

I'm disappointed because of the product itself. Instead of using the technology to help consumers gain the credit control many so desperately seek, MasterCard is using it to allow employers to set limits on employee corporate-account spending. MasterCard is giving employers a diverse set of tools that are incredibly useful. Managers can set limits not only on the amount of spending, but on where and when employees spend, and it even offers the option of sending real-time text messages back to the company whenever employees use the card. These options are almost exact analogues of the ones I proposed:  allowing consumers to set their own hard credit limits, to "black out" certain stores they find particularly tempting, and to enable them to receive a receipt stating how much room they have left in their credit limit each time they make a purchase. The card is even called "inControl," when I'd suggested "You're in Charge" as a possible product name.

How handy it would have been for me to point to this card when I gave my job talks. I must have answered the question about whether my ideas were technologically feasible dozens of times since October. On the other hand, maybe not. There are probably few fates worse for a budding credit scholar than to have one's ideas preempted by MasterCard. And yet, MasterCard does plan to market a similar card to parents of college students. Perhaps eventually this could lead to products that would help consumers control their own spending as well.

By the way, for anyone who by some chance happened to miss my posts on Credit Slips for the past six months or so, the reason for my absence is that I've been busy giving all these job talks. I plan to start posting regularly again as of now. The story does have a happy ending though. As of July 1, I will begin as an Assistant Professor at the University of Texas Law School in Austin.

Comments

[MK]

Congratulations on your new position.

Your idea is terrific.

Excluding the sole case of actual authorized excessive spending, credit cards are the safest and most convenient method of payment.

There are a number of other situations where a credit card restricted in this manner would be useful and, in my view readily adopted if available. Here are a few:

1) Akin to College Students/Parents are adults supported/financially assisted by a relative. Such people exist in significant number, whether they ended up there because of gambling or other addiction problems, mental health issues, or just garden-varietal irresponsibility.

2) The elderly, either for their use where their capacity is diminished or for their health aide's possession use.

Such a program (using a "secured card") could even find favor with bankruptcy courts as an efficient means to monitor and control personal expenditures -- assuming a credit card issuer would extend credit under such circumstances.