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The once almost-holy status of ‘free markets’ is finally coming down to reality. Many so-called markets are hobbled by asymmetrical information, derivative product markets, barriers to entry.

In the credit card market, the market is fragmented due to unusual and inconsequential product differentiation. Plans, cashbacks, points schemes, etc., may sound competitive, but on the other hand, the irrational increases in interest rate, ‘late-fee traps’ (in the words of President Obama) and other such gimmicks are irresistible and have sprung up across the board.

The vast majority of credit card holders are not the targets of these shady practices: these vulture-like practices prey on the weak and at the margin and are wholly disproportionate to the alleged risk, or actual harm, to the creditor. They are akin to a separate business model within the larger credit card market.

And this market-within-a-market is not competitive – it appears to be based on an oligopolic co-ordination. If it were truly competitive, we would be seeing ads like ‘only $1 late fee in the first week’, ‘no penalties for being late once in a while’, ‘no interest rate hikes’, ‘no fine print’.

But we don’t see that, do we? It may not be an intentional oligopoly – rather, an oligopolic lack of competition through unreasonable diversification of products and creation of a sub-market that no-one wants to change as draining those marginal customers is better than fighting over their business.