Wednesday, September 26, 2007

Revolution Bankrupsy

If one wants to see the connection between money and healthcare, one only needs to look so far as Founded by Steve Case (of AOL fame), it hosts a cadre of services including Revolution Health, Revolution Living and an even a financial arm with a new credit card provider, Revolution Money.

Revolution Health is basically a front for RediClinic that offers basic health services in a retail setting, and ExtendBenefits and ConnectYourCare, which provide “coverage-related products and services” (aka, insurance policies) to people and businesses. Revolution Living includes luxury resorts and wooing spas called Miraval – I guess to help with your “wellness.”

But imagine a credit card with 35.5% interest. This might be your interest rate if your credit history isn’t so great and you decide to sign up for Steve’s virtual credit card called Revolution Money. Revolution Money is exciting to merchants because it lowers their transaction fees to as low as 0.5% compared to the 1.5-8% charge of the more traditional charge cards. It is also exciting because your name and account number are not contained on the card making it, as they say, “more secure.” It seems you just make up a PIN number, show them your entire financial and personal information (including driver's license) and voila' – you’re in the money!

But in an almost identical mirror to the insurance industry, Revolution Money has shifted the costs to the consumer through exorbitantly high interest rates tied to the consumer’s credit rating and payment history. Interest rates can vary between 7.99 to 29.50% - but fail to miss two consecutive minimum payments or be late on payments four times in a year, see those interest rates balloon to between 13.99% and 35.50%. And imagine trying to reconcile an evaporating charge from your checking account when it’s not even tied to an identifiable account number. Does this sound anything like the beginnings of the current subprime mortgage financial crisis to anyone else besides me?

It is ironic that we see his money product line so closely tied to his health product - what better way to pay for your health care costs? Talk about "empowering the healthcare consumer!" Pay, baby, pay!

Unfortunately, credit card debt sinks many young financial savings plans before they can get started and the thought of this card being used for high medical costs is scary indeed, especially for our most “at-risk” population financially and medically. But what’s scariest of all?

It’ll probably sell like hotcakes.


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