Credit cards have long been a very good deal for people who pay their bills on time and in full. Even as card companies imposed punitive fees and penalties on those late with their payments, the best customers racked up cash-back rewards, frequent-flier miles and other perks in recent years.
Now Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit.
Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.
“It will be a different business,” said Edward L. Yingling, the chief executive of the American Bankers Association, which has been lobbying Congress for more lenient legislation on behalf of the nation’s biggest banks. “Those that manage their credit well will in some degree subsidize those that have credit problems.”
Banner ad
Wednesday, May 20, 2009
Punishing those who play by the rules
Those people who pay their mortgages on time have become angry as they see the government bending over backwards to help those who bought houses they couldn't afford and then got behind in their payments. Now those people who regularly pay their credit card bills will be penalized in order to support those who charge more than they can afford on their cards and have troubles making their payments. That is what will happen with the new legislation on credit cards.
Labels:
Economics
Subscribe to:
Post Comments (Atom)
10 comments:
Do they really think we aren't going to make adjustments to the way we use credit in response. When they start interest charges on the day I buy something, I'll stop charging it. When they add an annual fee, I'll cancel that card. Then who's going to subsidize the ones with weak credit?
Wow. Obama leads Congress to take action to curb sleazy, unethical practices of the credit card industry, and that's a bad thing? The anger concerning mortages is understandable. The credit card bill is a measure to stop companies from screwing people over with tricks, traps and fineprint.
Having just cashed in miles to buy a ticket to Mexico (and I never pay interest), I'd hate to see cuts in the awards programs.
But one, it may be a bluff. And two, the fault would lie with the greedy card company execs. Not Obama. Most people will see this as a success for Obama and Congress, including the repubs who voted for it.
You got it backwards. People who do not pay fees and interest are the free riders. The big revenue stream on credit cards comes from those who carry a balance from month to month.
Yes, mark. Credit card companies should be non-profit. Excellent idea.
Then when they go out of business, the feds can start providing personal credit instead. Beautiful!
Thanks, equitus.
Idiotic posts like yours help explain why people identifying as repubs are down to the low 20s. Defending retroactive interest rate hikes? Perhaps you beleive capitalism goes hand-in-hand with sleazy, deceptive practices. I don't. Corporations should be able to make a healthy profit without deceptive practices.
I use credit cards a lot, partially because I'm temporarily on a low income (went back to school) and partly because I run my own business. This has, alas, lead to carrying fairly high balances (before returning to school I paid off my cards every month)
I have no trouble making my payments, yet several of the credit card companies have recently increased my interest rates from fairly reasonable (7% or so) to totally insane. So yes, I definitely support legislation that keeps them from changing the rules of the game - in this case, costing me thousands of dollars with no fault on my part. 7% interest I'm willing to pay; 15%, I'm not!
Way to misrepresent, Equitus.
Mark says "Congress takes action to curb sleazy, unethical practices of the credit card industry"... and you invent something wholly fictitious that Mark never even hinted at ("Credit card companies should be non-profit") and argue against it.
That kind of tactic is what they call in poker "a tell".
Not completely the major source of income because those that pay off the balances on their cards usually have higher amounts charged to them. The transaction fee paid is from the merchant but also from the pricing of the goods purchased.
if congress does pass a law stating the credit card companies can raise rates but charge the new interest on new charges the is only returning the law to the way it was. has nothing to do with punishing good customers for the practice of bad customers.
Just more incentive to pay off my credit card, as if I needed more incentive.
Post a Comment