Churning

Churning
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Churning is the practice of customers to switch to another supplier based on a special discount offer. Mostly used in cellular telephone or credit card industries. For example, in the cellular phone industry a customer is using one type of phone network and wants  to switch to another because the other provider offers them better and cheaper service. People working in the phone industry make more money when they have more customers. Therefore, to attract as much customers as they can, they investigate what other providers offer, and tries to offer more favorable accounts. The customers who decide to switch to the other provider are doing the practice of churning. The same thing is in the credit card industry. The customer does not have to switch to another bank, they can just switch to another, more favorable credit card. It could be a better payment plan, a lesser interest rate that makes you switch to either another bank or different account. People who are employed to do such work, often receive a commission if the trade has been successful. This kind of work is often seen as illegal. Courts usually look at how often trades have been made, because if such things happen often, it usually lowers the value of an investment.

 

 

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