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Mr. Krab
05-19-2009, 09:59 AM
Credit card companies seek to extract more cash from best customers

By ANDREW MARTIN
The New York Times


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Cardholders who pay on time are dubbed “deadbeats.”
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<!-- Commenting out fact box for Jody Cox --> <!-- /mi/pubsys/story/asset_list, include_asset_type=>"factbox" --> 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 weeks-long grace period, according to bank officials and trade groups.

“It will be a different business,” said Edward Yingling, 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.”

As they thin their ranks of risky cardholders to deal with an economic downturn, major banks have already begun to raise interest rates, and some have targeted people who pay their bills on time. The legislation scheduled for a Senate vote today does not cap interest rates, so banks can continue to lift them, albeit at a slower pace and with greater disclosure.

David Robertson, publisher of the Nilson Report, which tracks the credit card business, said people who routinely paid off their balances have been enjoying the equivalent of a free ride, because many have not had to pay an annual fee and have collected points for air travel and other perks.

“Despite all the terrible things that have been said, you’re making out like a bandit,” he said. “That’s a third of credit card customers — 50 million people who have gotten a great deal.”

Robert Hammer, an industry consultant, said the legislation might encourage card issuers to become ever more reliant on fees from marginal customers as well as creditworthy cardholders, who are dubbed “deadbeats” in industry parlance because they generate scant fee revenue.

Banks used to give credit cards only to the best consumers and charge them a flat interest rate of about 20 percent and an annual fee. But with the relaxing of laws in some states, and the ready availability of credit scores in the late 1980s, banks began offering cards with a variety of interest rates and fees, tying the price to the credit risk of the cardholder.

That helped push interest rates down for many people, but they soared for riskier cardholders, who became a significant source of revenue for the industry. The recent economic downturn challenged that formula, and banks started dumping the riskiest and lowering their credit limits in earnest as the recession accelerated.

Now a rising chorus of consumers who pay their bills off every month is complaining of shortened grace periods, new hidden fees and higher interest rates.

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

Hammer said the amount of money generated by penalty fees like late charges and exceeding credit limits has increased by about $1 billion annually in recent years, and should top $20 billion this year.

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 bank revenues at a time 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.

A 2005 report by the Government Accountability Office estimated that 70 percent of card issuers’ revenues came from interest charges, and the portion from penalty rates appeared to be growing. The remainder comes from fees on cardholders as well as retailers for processing transactions. Many retailers are angry at the high fees and plan to pass them on to shoppers once the congressional legislation takes effect.

Consumer advocates say they have little sympathy for credit card issuers, arguing that they have made billions in recent years with unfair and sometimes deceptive practices.

“The business model will change because the business model doesn’t work for the public,” said Gail Hillebrand, a senior attorney at Consumers Union.
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Posted on Mon, May. 18, 2009 10:15 PM

Dartgod
05-19-2009, 10:09 AM
“Those that manage their credit well will in some degree subsidize those that have credit problems.”
In a nutshell, why this country is going down the tubes. People are no longer expected to accept any personal responsibility, whatsoever.

Dicky McElephant
05-19-2009, 10:10 AM
Good....I'll just go ahead...close my credit cards and not use that bank ever again.

alpha_omega
05-19-2009, 10:15 AM
This is totally a bizarro world....punished for paying on time??? WTF?

Deberg_1990
05-19-2009, 10:16 AM
Its the new Obama world order! Penalize the good people who do right to help subsidize the mistake prone.

KC Dan
05-19-2009, 10:17 AM
No good deed goes unpunished anymore....

Ebolapox
05-19-2009, 10:24 AM
fucking criminals. why be responsible when you can m00ch?

Chazno
05-19-2009, 10:26 AM
So the people that are smart enough with their money to not pay interest are going to be dumb enough to pay an annual fee?

Thats a dumb way of losing those transaction fees they charge the merchants...

el borracho
05-19-2009, 10:32 AM
Oh, poor banks... now they will have to eek out a living on the 3% skim of every transaction. :rolleyes:

Garcia Bronco
05-19-2009, 10:36 AM
Ditch credit cards. Seriously. Put these people, CC banks, out of business. How long do you think they'll last doing what amounts to loans to only people that don't pay? No long. Not long at all.

Old Dog
05-19-2009, 10:38 AM
In a nutshell, why this country is going down the tubes. People are no longer expected to accept any personal responsibility, whatsoever.

Since, I hate "This"...........

ABSOFUCKINGLUTELY, 100% agree with this one.

Dicky McElephant
05-19-2009, 10:38 AM
Ditch credit cards. Seriously. Put these people, CC banks, out of business. How long do you think they'll last doing what amounts to loans to only people that don't pay? No long. Not long at all.

Does anyone know if closing out credit cards really affects your credit score THAT bad?

L.A. Chieffan
05-19-2009, 10:39 AM
something bad, blame obama, check.

sedated
05-19-2009, 10:40 AM
Good....I'll just go ahead...close my credit cards and not use that bank ever again.

I thought the same, but credit cards are a lot more secure than debit cards. I'd like to keep one for on-line purchases and such, but doesn't seem worth it with all the extra fees. Now we have to decide between additional security and additonal fees.

That's, of course, until banks start charging more for debit card use.

Demonpenz
05-19-2009, 10:40 AM
the only acceptable debt for me is going to be car/morgage when i am ready. I haven't used a cc for along time.

L.A. Chieffan
05-19-2009, 10:40 AM
the only acceptable debt for me is going to be car/morgage when i am ready. I haven't used a cc for along time.

they wont let me have em

Ebolapox
05-19-2009, 10:41 AM
this is yet another reason I'm glad I swore off of credit cards years ago. I had one that my dad got for me (we have the same name, with sr. and jr. suffixi) that had a 200 dollar balance... by the time I was 20 years old, the balance was 1300. my dad was never great with money, and I obviously didn't get good advice/behavior modeling. I paid it off, and learned my lesson.

WilliamTheIrish
05-19-2009, 10:42 AM
Good bye card.

For every company that pulls this there will be one that sees an opportunity and will remain free of fees. doesn't. They will get an overwhelming number of new card holders.

kaplin42
05-19-2009, 10:42 AM
If that article is true, the CC companies are going to suffer. As it stands a lot of people make every day purchases with their CC's, and then pay the bill in full at the end of the month.

But if they start tacking on interest right away, that will stop immediately. Especially when they are raising interest rates just because.

Why would you go into a store and buy a $100 item with a CC when immediately after purchase, its price went up $20 because of the interest on the card.

I think what a lot of the issue is, these bastards were used to making ass loads cash, and now they aren't, and they are still trying to figure a way out to F the American people and keep that bank roll coming.

Dicky McElephant
05-19-2009, 10:42 AM
I thought the same, but credit cards are a lot more secure than debit cards. I'd like to keep one for on-line purchases and such, but doesn't seem worth it with all the extra fees. Now we have to decide between additional security and additonal fees.

That's, of course, until banks start charging more for debit card use.

Well I have 4 CCs right now (yeah I know...I'm dumb).....but I'm working on paying all of them off right now. I'm seriously considering just keeping the one that has the lowest APR and closing the rest of them out.

Dicky McElephant
05-19-2009, 10:43 AM
If that article is true, the CC companies are going to suffer. As it stands a lot of people make every day purchases with their CC's, and then pay the bill in full at the end of the month.

But if they start tacking on interest right away, that will stop immediately. Especially when they are raising interest rates just because.

Why would you go into a store and buy a $100 item with a CC when immediately after purchase, its price went up $20 because of the interest on the card.

I think what a lot of the issue is, these bastards were used to making ass loads cash, and now they aren't, and they are still trying to figure a way out to F the American people and keep that bank roll coming.

Oh...and I love the fact that the CC company lowered my limit and didn't tell me about it until 3 weeks later.

Ebolapox
05-19-2009, 10:43 AM
I thought the same, but credit cards are a lot more secure than debit cards. I'd like to keep one for on-line purchases and such, but doesn't seem worth it with all the extra fees. Now we have to decide between additional security and additonal fees.

That's, of course, until banks start charging more for debit card use.

see, I have a method for that. I have two separate accounts--the main account, and the account I use for online purchases. if I want to buy something online, I only transfer just enough to cover the purchase. if it's compromised, I'm not out much.

sedated
05-19-2009, 10:45 AM
what a shitty situation. the citizens have no money. the governnment has no money, so they charge the citizens. the businiesses have no money, so they charge the citizens.

it seems corporate america won't stop until there are only 2 classes: the ultra-rich big-business executives, and the ultra-poor.

Cannibal
05-19-2009, 10:50 AM
I keep one card for emergencies. But I usually don't carry a balance. If they try to fuck me as stated in the article, I'll go elsewhere.

King_Chief_Fan
05-19-2009, 10:56 AM
Good bye card.

For every company that pulls this there will be one that sees an opportunity and will remain free of fees. doesn't. They will get an overwhelming number of new card holders.

exactly...I never pay a fee and never will.
I never carry a balance and never will.

I will go back to writing checks. I only use a CC so I can only write one check a month....see ya credit cards, I won't miss you.

joesomebody
05-19-2009, 10:59 AM
This article has no merit. Credit cards serve many purposes, and make profits for the companies in a large number of ways.

As was stated earlier, the card issuer gets a 3-5% surcharge from merchants for every purchase (like magazines and newspapers, it pays to have lots of cards out there so you get more surcharges.)

Second, as was stated earlier, there is no way the market will prevent some companies from seeing the light and not starting new fees, thus getting all of the stupid credit card companies old customers.

Third, companies like Southwest Airlines, Kohls, etc. use credit cards as incentives as a way of getting customer loyalty. They want as many cardholders as possible, so are not going to force customers away by being stupid.

All the new legislation does is make card issuers be slightly more responsible and quit issuing cards to people that have a track record of being ruined by them. It's an indirect route (before people say this isn't true.) By preventing the cardholders from raping the bottom 25% who are too stupid or irresponsible to know better, it no longer becomes business-wise to issue them cards.

Don't worry people. This is credit card lobbyist fodder to stir up the rich folk.

joesomebody
05-19-2009, 11:07 AM
One other thing, for those that think this is penalizing the "good" customers. That isn't really true. The best customers in the eyes of the issuer are those who habitually forget to pay their bill on time and/or carry a balance but always pay the minimum, but care enough about their credit scores to pay it when they remember/have the money.

A credit card company makes almost nothing off of those who pay off their balance every month and are always on time, especially after they give you cash back, or some other crackerjack prize.

The new regulation won't really have the effect stated in the article, there is still plenty of profit in the CC market, it just won't be as easy to scrape money off of the bottom of the economic gene pool, therefore some companies may not be able to survive, but others will thrive.

old_geezer
05-19-2009, 11:10 AM
exactly...I never pay a fee and never will.
I never carry a balance and never will.

I will go back to writing checks. I only use a CC so I can only write one check a month....see ya credit cards, I won't miss you.


This is exactly the way I feel. I have more credit cards than I need anyway. I have two that I use for internet purchases (one strictly for on-line purchases at Wal-Mart) and another that I use if the need should ever arise. I pay all balances off completely every statement. If any of them decide to start charging me a monthly fee for their card I will cancel it immediately. Don't really need you - certainly won't pay for the "privilege" of having one in my pocket.

sedated
05-19-2009, 11:20 AM
If any of them decide to start charging me a monthly fee for their card I will cancel it immediately.

I imagine that as soon as a company sends out the notice that they are raising fees for people who pay on time, the customer service lines will be so flooded with people calling to cancel that you won't even be able to get through.

***SPRAYER
05-19-2009, 11:32 AM
Libtard policies always pave a road to hell.

http://finance.yahoo.com/banking-budgeting/article/107096/Credit-Card-Industry-Aims-to-Profit-From-Sterling-Payers?sec=topStories&pos=2&asset=&ccode=

PunkinDrublic
05-19-2009, 11:40 AM
With banks skimming money out of their customers checking accounts with all their new B.S fees who needs credit cards when you can get ripped off by your own bank. When I used to not have the funds in my checking account my debit card would just decline but I guess that just that wasn't making them any money. I recently found out the hard way that instead of declining the transaction my bank would just tack on an overdraft fee of 35 dollars everytime you go over. I got taken $200 in overdraft fees for purchases of less than $20 stolen from my account by my bank. Hope they enjoyed the relatively small amount of money they've stolen from my account by giving me a service I never asked for. I'm closing my account with them permanently.

EyePod
05-19-2009, 11:52 AM
Shit like this makes me glad that I don't have a credit card.

sedated
05-19-2009, 11:59 AM
instead of declining the transaction my bank would just tack on an overdraft fee of 35 dollars everytime you go over. I got taken $200 in overdraft fees for purchases of less than $20 stolen from my account by my bank.

that's pretty universal now.

I also like how they inform you that you are overdrawn via snail mail - so you have plenty of time to rack up debits (along with the $35 overdraft fee per debit) while that letter is sitting at the post office for a few days.



if you have 2 accounts at the same bank and sign up for overdraft protection, which draws money from your other account if you are overdrawn. They still charge me like $7 per auto-transfer, but its cheaper than $35 a pop.

King_Chief_Fan
05-19-2009, 12:09 PM
With banks skimming money out of their customers checking accounts with all their new B.S fees who needs credit cards when you can get ripped off by your own bank. When I used to not have the funds in my checking account my debit card would just decline but I guess that just that wasn't making them any money. I recently found out the hard way that instead of declining the transaction my bank would just tack on an overdraft fee of 35 dollars everytime you go over. I got taken $200 in overdraft fees for purchases of less than $20 stolen from my account by my bank. Hope they enjoyed the relatively small amount of money they've stolen from my account by giving me a service I never asked for. I'm closing my account with them permanently.

you seriously cannot balance a check book? You write hot checks and don't know they are hot? There is a little ledger in your check book called a check register. The bank has to protect itself somehow when people write checks that cannot be cashed.

PunkinDrublic
05-19-2009, 01:05 PM
you seriously cannot balance a check book? You write hot checks and don't know they are hot? There is a little ledger in your check book called a check register. The bank has to protect itself somehow when people write checks that cannot be cashed.

I didn't write a check. I use the debit/credit card. Most of the time it would just take money from my savings if I went over. This time due to an emergency my savings had been depleted. In the past the transactions would just decline at the point of purchase. I was unaware that banks had unvolunarily given me overdraft protection because this is the first time I had been put in that situation.

PunkinDrublic
05-19-2009, 01:09 PM
that's pretty universal now.

I also like how they inform you that you are overdrawn via snail mail - so you have plenty of time to rack up debits (along with the $35 overdraft fee per debit) while that letter is sitting at the post office for a few days.



if you have 2 accounts at the same bank and sign up for overdraft protection, which draws money from your other account if you are overdrawn. They still charge me like $7 per auto-transfer, but its cheaper than $35 a pop.

Yet if you're out of town and make purchases or use an atm they won't hesitate to call you. In other words when they stand to lose money they'll call you immediately but when they can scam you through fees it's through mail.

Skip Towne
05-19-2009, 01:17 PM
Since, I hate "This"...........

ABSOFUCKINGLUTELY, 100% agree with this one.

This

alanm
05-19-2009, 01:25 PM
Ditch credit cards. Seriously. Put these people, CC banks, out of business. How long do you think they'll last doing what amounts to loans to only people that don't pay? No long. Not long at all.Dave Ramsey agrees with you.
That's why I'm almost done paying off my cards. Cash or check card from now on. :thumb:

talastan
05-19-2009, 01:26 PM
Glad I don't have any CCs anymore. I use debit card, because contrary to popular belief they are just as secure as a CC. You have the same dispute privileges as you would with a CC and you're fraud liability is only $50 if you notify your bank within 60 days of the transaction posting. Most banks will cover all of the fraud in most cases. No reason to pay interest for the same services you can generally get for free from your own bank IMO.

talastan
05-19-2009, 01:26 PM
Dave Ramsey agrees with you.
That's why I'm almost done paying off my cards. Cash or check card from now on. :thumb:

Dave Ramsey is great. I'm working on my debt snowball right now. Rep to you my friend!! :thumb:

RJ
05-19-2009, 01:34 PM
CC companies have been looking for any and every angle to screw their customers for as long as they've been around. They don't actually care which customers they screw. Virtually every bank has raised their CC interest rates, whether the customers were responsible or irresponsible, and that was before Obama asked for these reforms.

It's just their nature. That's why I carry no CC balances at this time.

Groves
05-19-2009, 01:42 PM
I really do feel for the businesses that have been forced by consumer pressure to pay the fees to the CC companies on every purchase.

If we were "charged" overtly and externally by the CC company every time we made a purchase, we'd get all put out in a hurry, but letting the businesses pay for it, and letting their prices reflect it? I don't even think about it.

Having said that, I think I *would* be willing to pay a little for convenience in using a plastic card. Can't get a decent burrito supreme with a check, now, can we? Need I also say "Crunch wrap supreme?"