Big Changes Coming for Credit Card "Deadbeats"





cartoon of people holding heavy credit cardsSo, you have great credit do you?

You pay all of your credit card balances on time? You've never missed a payment in your life?

Well I have news for you - you are about to pay much more for the "luxury" of using your credit cards.

Over the past few decades, credit card customers who repay their bills on time every month have been able to earn cash (or cash equivalents) every month through a combination of interest rate grace periods cash back / rewards programs.

Well, those days are coming to an end.

The Senate voted on Tuesday to restrict interest rate increases and fees on credit cards, and now the banking industry and other trade groups are warning of large-scale changes in the industry.

The credit card industry contends that they are dealing with a perfect storm of problems, and that interest rate increases on customers who don't pay their bills in full every month are warranted. They argue that limiting their ability to raise interest rates and fees will mean that they will have to raise the money elsewhere.

Note: this credit card reform bill doesn't stop companies from raising rates - however, it does limit the pace at which they can increase them.

Delinquencies are rising and uncollectible debt is piling up as many cash-strapped Americans turn to credit cards to subsidize their lives.

Where are the credit card companies going to find this money if they can't increase interest rates and fees to their liking on customers who carry balances every month?

The answer: "good" customers.

Customers who pay their bills on time and take advantage of the grace period on interest rates.

Customers who take full advantage of cash back programs and other reward programs.

Customers who pay no annual fees.

What's coming for these people? Most likely:

1. The re-institution of annual fees.

2. The elimination of the grace period for interest rates (meaning, you will start paying interest the SECOND that you make a purchase on your card).

3. The scaling-back, or elimination altogether, of cash back and other reward programs.

Are you a credit card customer that pays all of their balances on time? Who takes advantage of cash back and other reward plans to the fullest? Well, the credit card industry has a name for you. "Deadbeat". And they plan to make the "deadbeats" pay.

Not only that, but these credit card companies will be frantically jacking up rates, even on their best customers, before the bill fully goes into effect. There is a good chance that you have already witnessed this, as many people (even those with sterling credit and perfect repayment histories) have reported that their interest rates have been raised over the past few months.

I have a question for all of those people out there who pay their credit card bills on time and will be negatively impacted by these proposed industry changes:

Will you still use a credit card if you have to pay annual fees and interest from the moment that you make a purchase? If cash back and other reward programs are significantly scaled back or eliminated?

Or will you cut up your credit cards and use cash and/or debit cards instead?

Source: Credit Card Industry Aims to Profit From Sterling Payers




Filed under: General Knowledge

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