Empty Threats and Credit Card Companies
As Congress moves to reform punitive fees and penalties levied on cardholders who miss payments or exceed their credit limits, credit card issuers are threatening to charge new fees for customers who don’t carry balances each month and pay their bills on time, The New York Times reports.
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.”
I don’t believe this for a minute.
Those who manage their credit well aren’t going to put up with subsidizing anyone. They’ll do what people with sterling credit always do — cancel the card from the issuer trying to charge them, and shop around for something better. And if they don’t find it, they’ll pay in cash, or use a debit card. Delinquent borrowers rarely had this option, which is why they found themselves caught in a debt trap, paying high fees and rates, while issuers reaped profits from them.
This new threat sounds like a scare tactic, to counter the populist anger against credit card companies. But all it’s really going to do irritate a whole new class of credit card customers, who aren’t likely to sit back and take it as the credit industry looks to them for new ways to make money.