I have been watching keenly the way businesses(and banks) market to the general public and wanted to write a post about how deals are sugarcoated to influence decisions.Here are 4 strategies..
1. “You are eligible for a personal loan/credit card loan…. “:This is a statement that grabs the attention of any one who needs some reassurance that his worth is being appreciated.Some people brag that banks keep calling them to get them to take loans.Consider this…your money in a savings account appreciates at 6% and around 8.5% if you have a fixed deposit/recurring deposit amount (I am in India,bank rates in other countries may vary).
However,if you take a personal loan/credit card loan you will be paying interest in the vicinity of 13 -18 percent to the bank—pretty neat strategy to earn from you and keep you hooked.So ,unless you really are in dire need/facing emergencies,avoid personal loans/credit card loans.
2. “The personal loan is offered to you a reducing rate of interest” : I am amazed at the number of people who think that paying a loan at reducing rate of interest is a good deal.The word “reducing”somehow convinces them that the interest amount dwindles immediately.When you pay your loan at reducing rate of interest in EMIs, a huge chunk of the EMI in the initial months go towards paying the interest amount.You only start making a dent in the capital that you owe, after a year which means that you eventually end up paying more.So ‘reducing’ rate is not a better option.Unfortunately, the banks that do offer fixed rate of interest(very few),have stringent guidelines for approval.
3.“Buy…..Mobile/car/tablet and get a cash-back of Rs….” :Another variant is “Spend upto 50k to be eligible for an Ipad”!!What do they think? Istupid?When people come across this in an advertisement they just focus on the word “cash-back” and are influenced to make the purchase anyway without realizing that businesses use the “cash-back” strategy to make you buy something for which you may have no apparent need.The buyer is attracted to the word “cashback” and figures that he might not get a better deal in the future and goes ahead and makes his “investment”(And then goes on to brag to his mates about how the “deal” has made life easier ).
4.“Buy 3,get 2 free…..”: Beware of “Combo offers” that work various permutations/combinations into their “deal”.You will eventually be paying more and will be carrying stuff for which you do not have any apparent need.
So,there it is 4 tactics you’ve got to be careful about in future.These strategies are not unethical or illegal in any way but it pays to know the facts.Let me know if you have observed similar strategies.
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