With even a watered down bill trying to stop the most brazen loan shark practices of credit card companies, the industry is now planning to retaliate. From the New York Times:
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.
The article goes on trying to claim those predatory practices are only those riskier borrowers but all of America knows that's not the case.
Note most companies saying this are TARP recipients.
These same companies are expected to rake in $20 billion dollars on late fees and penalties this year.
Update: The Senate passed the watered down version of credit card reform. The next step is to select conferees who resolve the differences between the House and Senate versions. There is no point in analysis currently since very often conferees change legislation after it has passed both houses.
Read the same thing in the Oregonian
And my first thought- this is the end of the beginning of the depression.
So far, we've only had skittish lenders in the credit crunch. This action, is going to create skittish borrowers. I know several "good risk people" who will just pay off their current cards at this point and say goodbye rather than accept the new terms.
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Executive compensation is inversely proportional to morality and ethics.
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Maximum jobs, not maximum profits.
Get even with credit card companies
The answer to this is simple. Get even with credit card companies by cutting up your credit cards, paying them off as soon as possible, and living within your income. That's what I'm doing, and I encourage all to do likewise. The borrower is the slave of the lender.
Road to hell paved with "good" legislation
I knew I was going to get screwed. The last time I was late on a payment, was back in '96, when I was in an auto accident. But since then, not only do I pay on time, I pay more than the minimum amount. Yet I am going to get penalized?
A lot of folks were sold credit they obviously could not handle. I feel for them, and you know what something should be worked out, perhaps by a third party. Frankly, there needs to be a new system regarding consumer credit, especially dealing with cards. Help those who are having a hard time, and put them on a new credit scheme that reflects really what they can pay and handle. If it means lower levels of credit so be it, because its insane to give someone making $20k/yr a credit card equal to what they earn in that time.
Now, if I had a boutique finance firm/bank, I would take advantage of what will be a pool of very pissed off good credit users. Create a card that has the strictest of entry requirements, say a FICO score of 750 or more (along with a good payment history). Offer bennies that are being cut by other cards and other goodies like a substantially lower rate. Those who play by the rules shouldn't be punished.
And that last statement goes for either those who are poor or rich or in-between. You have folks out there who honestly want to meet their financial obligations. But, for one reason or another, cannot. Some folks, and I know a couple, are just out there willing to screw the system, their credit history be damned. Time to weed out these people.
For those who don't have a good score, yet are honest and trying, they need assistance. You know how is it that we can get credit to poverty-stricken women in India and not here?
Actually, no
:"I knew I was going to get screwed. The last time I was late on a payment, was back in '96, when I was in an auto accident. But since then, not only do I pay on time, I pay more than the minimum amount. Yet I am going to get penalized?"
No, you're in the group who carries a balance in between months.
There are really three groups:
1. People who pay off the balance *before* they get the bill, to avoid any interest charges at all. This is the group the article is saying is going to get screwed, they've had a pretty good ride being able to get short term (15-28 day) loans at no interest and be paid to do so in some cases (frequent flyer miles, reward points, etc). Interest will now start on day of purchase, and say goodbye to no annual fee and rewards points.
2. People like I used to be and you are now- paying off faster than you spend, but still carrying a balance. This is the group that will be helped the most by the new law- it will lower your interest rate and allow you to pay off the cards sooner.
3. Total deadbeats who go from one card to another and never pay them off. These people are helped somewhat with the usury cap, but are too stupid to take advantage of it.
"Now, if I had a boutique finance firm/bank, I would take advantage of what will be a pool of very pissed off good credit users. Create a card that has the strictest of entry requirements, say a FICO score of 750 or more (along with a good payment history). Offer bennies that are being cut by other cards and other goodies like a substantially lower rate. Those who play by the rules shouldn't be punished."
The problem is, under the new rules, you won't be able to make any money unless you target group 2 instead of group 1. Same idea, but switch that FICO score to a 650-800, and don't accept anybody over 900, because they're the ones playing game #1.
Group #3 needs business microloans, not credit cards.
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Executive compensation is inversely proportional to morality and ethics.
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Maximum jobs, not maximum profits.
Mister Seabert
I stand corrected, sir. Well, you are right, it would be group 2 I would be targeting for my fantasy credit card company. And yes, I think you're spot on with microloans. Did you read the book by Muhammed Yunus? Fantastic read.
Yes I did
Made me think about starting a thrift.....: -)
Not really though, I'm too adverse to paperwork for it.
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Executive compensation is inversely proportional to morality and ethics.
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Maximum jobs, not maximum profits.
Visa: say goodbye to transaction fees
What the credit card providers and their PR shills fail to mention is that they get fees on every transaction. Those with sterling credit use their card frequently. Make those people angry with annual fees, terminated rewards programs, ... and they will ditch their credit card and with that, the credit card provider LOSES ALL THOSE TRANSACTION FEES.
Merchants will probably jump for joy if this happens. They'd much rather you pay in cash in order to avoid paying the transaction fee to the credit card provider. That's why so many merchants want you to sign up for their credit card (like a Target or Lowes credit card - so they don't have to pay a transaction fee to the credit card provider).
very good point on Visa/MC!
They turned money into a little transaction fee for every time funds are exchanged. Nice trick, adding additional costs on every single transaction...
basically putting a toll on money exchange.
We should go after that one and how they bleed small business who take any sort of Visa/MC for payment.
Of course Visa/MC is not JP Morgan Chase, Capital One etc. who actually hold the credit card accounts and terms.