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Tuesday, May 19, 2009

No good deed goes unpunished

As credit card companies are told they can't gouge their weakest customers any more, they're planning to sock it to those of us who pay our balances in full every month.

Comments (18)

Article cites a fairly recent study which estimated that about 30% of credit card firms' revenue came from fees paid by retailers. We consumers benefit from the convenience provided by those retailers. Perhaps they should offer two-tier pricing: cash and credit card, just as many gas stations do. This would allow (1) credit card issuers to raise fees rather than sock it to on-time payees, and (2) factor the added cost into consumer goods so we buyers could make an informed decision about whether credit as worth it. Bottom line: curb interest rates, make the cost of credit more transparent to consumers.

Bank of America already lost my business. I've had a Visa with them for a few years at 7.9%. I have a decent amount of debt on it, but I'm never late, I pay more than minimum due, and I have a great credit history.

Last month they informed me they were raising my rate to 14%, unless I 'opt out' which essentially locks in my old rate if I never use the card again. They would have made their money had they not attempted this brazen act, but there's no way in hell I'm keeping my debt with them. Idiots.

It'll be great for me if they start charging those who pay in full every month. I'll switch to cash, suck up the month's cash flow somehow that I lose as a result, and be more aware of what I'm spending.

Allen L: Me, too. And they'll lose my annual membership fee.

I love this country. Lets punish those who are fiscally prudent and subsidize those who aren't. This admin is getting off to a great start.

Steve- Huh? Obama is moonlighting at a bank doing risk models?

No, this is quite clearly the credit card companies milking the only sure things in their portfolios. And their current predicament came after eight years of getting nearly everything they wanted from a legal standpoint. Thank Bush, not Obama.

Lets punish those who are fiscally prudent and subsidize those who aren't. This admin

Ahem. Did you miss the start of the TARP program, in the previous administration?

"Did you miss the start of the TARP program"

I never said I liked the TARP program or what it has changed into either. The whole issue of throwing pots of cash and then passing laws to change economic forces is going to come back and bite us.

There is a reason people with poor credit get charged more, it is so they use credit less or as little as possible.

"Obama is moonlighting at a bank doing risk models?"

I quote from the article - "Now Congress is moving to limit the penalties on riskier borrowers"

This isn't going to work. Many consumers (like me) will switch back to checks/debit cards/cash transactions, just to avoid the transaction cost of a credit card, and banks will lose a significant source of revenue - the 30% of the card revenue derived from retailer fees that Don cited - from these lost transactions. Whether this loss exceeds the gain from the new cards' annual fees and no-grace period interest charges is hard to say.

But this 30% represents way too much temptation for a small renegade bank or credit union to break away from the others and offer a card with no fee and 20+ days interest free grace period to creditworthy people. And given the present environment, people will have no loyalties to their present bank - and it's easier to change a credit card than say, a checking account or cell phone provider.

Pretty gutsy, Jack, what with the CHASE ad just to the right. Guess we know *how* they will make banking better in Calif. (A CHASE CC customer, btw)(For now).

Now, you see that? Google ads is showing you a different ad from the one it's showing me.

^ Mark Mason...yr comment is funny...I see the same Chase advert off to the right ....don't worry "They are here for us " until it starts raining

"And their current predicament came after eight years of getting nearly everything they wanted from a legal standpoint. Thank Bush, not Obama."

I don't disagree about Bush, but Barney Frank and Chris Dodd were there also.

As far as credit card companies getting what they want, We pay off our balances and my wife uses the card for expenses, so we've been able to run up a lot of points at very low cost.

In addition, during these preious 8 years of greed, I see a lot of commenters still took advantage of credit cards at a low cost for use.

My point was now that most of the repsonsible (defined as paying their bill every month) people may lose those benefits when this law passes.

Slow down, folks. Isn't it just possible that the Times story is simply parroting the talking points of the credit card lobbyists?

This is a very competitive market and I really doubt that they'll stick it to those who use their cards and (as pointed out above) generate a lot of merchant fees.

Paul G has it right.

The credit card companies make easy money off the transactions of people who pay off their balances every month. Those companies aren't going to want to lose those steady customers at the same time that their ability to exploit financially shakier customers is being curtailed. I think it's more likely that the good-credit-risk folks will soon be pursued more vigorously, with more generous "mileage" and "points" enticements.

The credit card lobbyists have lost this round, and they're making false statements in a desperate attempt to scare people into thinking that someone other than the blatantly exploitive credit industry stands to lose out.

I don't understand how anyone not connected with the credit card companies and banks can see a downside to this legislation.

Another vote for paul g. But Richard is wrong, wrong, wrong if he thinks the only folks harmed are greedy evil bankers. Most likely, the harm will directly befall the people allegedly being protected. I mean, unless you think that you just know better than they do what's good for them (and I know many people do think this). Higher fees on low risk customers? No--that's just rhetoric and lobbying--hardly the lone province of the bankers. But higher fees on higher credit risks because interest rates and other mechanisms for price discrimination are controlled? Aboslutely. The consequence: Yes, fewer poor people will get credit. If you think this is unequivocally good you are a smug know-it-all. Most likely, it will lead to an increase in alternate forms of credit--pawn shops, loan sharks, payday lenders, etc. That may be good, and that may be bad. I tend to think it will be bad. But the claim that only bankers would see a downside to this legislation is wrong.

"fewer poor people will get credit. If you think this is unequivocally good you are a smug know-it-all."

Yeah, I guess the predatory lending practices of credit card companies are helpful to the poor--just like loan sharking, gambling, drug dealing and robbing banks are helpful to the poor. For a very short while, and for the very lucky few.

Maybe I should have been more clear: If you think it's unequivocally good, you're a smug know-it-all. Also if you think it's unequivocally bad. The reality is that I don't know in every case. Neither do you. Maybe the costs are worth the benefits. But before you go around presuming that poor people need to be protected from themselves, you should at least acknowledge there is a cost. Some people will be priced out of the credit market. That may cause all kinds of trouble. Maybe it's worth it (I happen to think that we should err on the side of freedom, but some people are always ready to act on others' behalf). Maybe no one should ever buy anything with credit. Actually, that's just ridiculous, although some people hold this view. But, ok, maybe we do use too much credit. I'm glad you know exactly where to draw the line, and glad that you don't mind the consequences for people who end up on the wrong side if it. I prefer a bit more humility, myself.

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