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Credit Cards To Stick Good Customers

From those champions of wealth redistribution in any form at the New York Times:

Credit Card Industry Aims to Profit From Sterling Payers


May 19, 2009

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

As they thin their ranks of risky cardholders to deal with an economic downturn, major banks including American Express, Citigroup, Bank of America and a long list of others have already begun to raise interest rates, and some have set their sights on consumers who pay their bills on time…

The industry says that the proposals will force banks to issue fewer credit cards at greater cost to the current cardholders…

Regulations passed by the Federal Reserve in December to curb unexpected interest charges would cost issuers about $12 billion a year in lost fees and income, according to industry calculations. The legislation before Congress would build on the Fed rules and would further squeeze banks’ revenue when they are being hit with a high rate of credit card charge-offs. The government’s stress tests showed that the nation’s 19 biggest banks will take on $82 billion in credit card losses in the next two years

With many consumers mired in debt and angry at what they consider gouging by credit card companies, the issue of credit card reform has broad populist appeal. Members of Congress and the Obama administration have seized on the discontent to push reforms that the industry succeeded in tamping down when the economy was flying high…

In other words, credit card companies are going to pay for all of the new requirements that Mr. Obama has put on them, such as forgiving bad debt, off of the backs of responsible credit card holders.

That sounds very familiar, doesn’t it?

This article was posted by Steve on Tuesday, May 19th, 2009. Comments are currently closed.

22 Responses to “Credit Cards To Stick Good Customers”

  1. curvyred says:

    Yep – once again us responsible folks will be footing the bills (lterally) of the irresponsible.

    This will further harm the economy – especially with the interest rates accruing immediatly. I use my cards for cashback rewards, perks and the convenience of paying/earning – I then PIF (PAY IN FULL), Looks like I will have to change strategies. I will no longer use my cards, I will pay in cash

    • Dangerous says:

      There’s a problem there, curvyred. If you pay for everything in cash, how do you go about building a credit rating in the time between you turn 18 and apply for your first mortgage?

      How about the longer term ramifications of that? Ease up punishment for risky creditors getting mortgages, punish those who would be good investments in a myriad other ways… and then wonder why nobody even tries to make money. Economy: 0 Communism: 1. Then there’s not enough wealth to spread around, but at least they can make sure misery is distributed.

    • curvyred says:

      Yes – Socialism is wonderful – until you run out of other people’s money.

    • Colonel1961 says:

      Build your credit by borrowing from a bank via small, short-term loans. Borrow $1,000 at 7%, pay it back over six months, etc. Small cost involved and (just don’t spend the money) almost no risk.

  2. Right of the People says:

    We recently paid off our Chase Master Card and the bastards tripled our interest rate! I called to ask WTF and was told it was their new policy and couldn’t get a better explanation so I told them to take their card and place it in a place where the sun doesn’t shine. We have only two cards left and if they pull some BS like this, I guess I’ll cease to be using them. I’m with you CR, I think cash is the way to go. At least with cash, you always know when you’ve reached your “credit” limit.

    • Liberals Demise says:

      They will all follow suit because Barry Da Butcher has got to do something about people who pay their bills on time. As for me…..I just cut up my last (Capital One) card because this recession we are in just pulled my credit score down from good to bad without using my card. I had to rebuild my credit after 2 divorces and never had scores this low. Credit will never be like it was before thanks to the Libtards and their universal “we is alls gots to be da sames” attitude. (and it sucks)

  3. proreason says:

    “Aaaah, I love the smell of redistribution in the morning”

    Genaralissimo Obamy

  4. Douglas says:

    Eh, my credit score is north of 800 and I have 2 cards I put a couple of thousand dollars a month through and pay in full. I’ve a couple of other cards that raised their rates years ago and have had zero balances since.

    Late fees and interest are not the only source of income. CC companies only pay the merchant 98 to 99 cents on the dollar. So they’re getting $20 to $40 a month from my business as it is. If they can’t live on that, well, someone else can.

    If they don’t want me as a customer, it’s really their loss, not mine, I can find another bank easily enough.

    • BannedbytheTaliban says:

      “I can find another bank easily enough” Thats the rub, with government controlling what the banks can and cannot do, there is no “other” bank. It is all one nation, under socialism, with liberty and justice for some.

    • Liberals Demise says:

      ” …… with liberty and justice for all that have a 900 or better score.”

  5. GetBackJack says:

    Our situation is identical to Douglas (above). North of 800 and except for a small amount left on a mortgage, no debt.

    Except that we have two cards, total. (1) from Wells Fargo (the bank that’s doing very well, thank you) and (1) from the local, well run 70 year old credit union, managed by people I’ve personally known for 30 years.

    If we’re not safe from stupid tactics in that scenario .. to heck with it. I seemed to live and have a good time before I got a credit card, bet I can do it again.

  6. proreason says:

    I didn’t really understand this until I read Rush’s website, probably because I couldn’t believe the Moron’s Criminal Cabal would do something like this.

    1. Instead of charging no interest if you pay on time, they will be forced to charge interest.
    2. Rewards programs are going to be shut down.

    In my case, that is going to cost me about 1-2% of every purchase, because that is what rewards programs are worth to me. And that doesn’t count interest earned during the grace period (which is nothing now but in normal times is another 1/4 to 1/2% of each purchase if you pay on time).

    So the cost of everything I buy with credit cards is going up 2%.

    So that cheats and criminals will have to pay less interest.

    And oh yeh, the credit card business will shrivel to a fraction of what it is today…..which will throw many thousands of people out of work.

    Change. Hope and change.

  7. BillK says:

    So I guess I just won’t be buying anything off the web or at many retailers anymore.

    I refuse to pay interest on a charge I will be paying off when I get the bill, no one takes checks, and I’m not going to carry around large wads of cash.

    Congratulate Mr. Obama on destroying the last vestiges of a consumer-driven economy.

    • proreason says:

      good point BillK.

      This will destroy online merchandising, which in turn will diminish everybody’s life, since there are many items take a huge effort to find at brick and mortar outlets. That also will cause many thousands of layoffs, in addition to the mega layoffs at the credit card companies.

      Another freedom destroyed within 120 days.

  8. canary says:

    After Obama paid the banks all that bailout, mine went up on interest even though I always pay full amount on time. I thought that sucked. But, now Obama can do this? Is this because the banks too money from govt? Obama’s recent speeches to the public, was that no more hidden fee’s.

  9. Knuckle Dragger says:

    If it was profitable for CC issuers to stick it to those of us who pay in full, they would already be doing it. They tried this a couple years ago and it never caught on – I’m assuming because all of them would have to do it for it to work. That was pre-subprime crisis, and the reasons for keeping your creditworthy customers around are now more clear than ever. Any bank who is content to live off the transaction fees while greatly reducing their writeoffs should be able to do just fine. (Maybe not like in the good old days, but still make a profit.)

    I don’t think there is anything to this – just an unsuccessful attempt to scare congress on the eve of the vote.

  10. 1sttofight says:

    How long will it be before we have to get the gov. approval to write a check and spend our own money? That is if we still have money. I expect cash to be outlawed before long.

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