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HonestChieffan
05-20-2009, 05:22 PM
Well, it looks like Obummer has focused on you if you pay your bills...you should be charged and made to pay if you are the best of credit card customers. More soak the rich? Is there no limit this goon will go to penalize the people who make the economy work?...

http://www.nytimes.com/2009/05/19/business/19credit.html?_r=2&hp

Credit Card Industry Aims to Profit From Sterling Payers
ANDREW MARTIN
Published: May 18, 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.



Credit Card Wars: A Penalty for Thrift
Should responsible card users be penalized for paying off their monthly balance?

Post a Comment »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.

“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.”

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 legislation scheduled for a Senate vote on Tuesday does not cap interest rates, so banks can continue to lift them, albeit at a slower pace and with greater disclosure.

“There will be one-size-fits-all pricing, and as a result, you’ll see the industry will be more egalitarian in terms of its revenue base,” said David Robertson, publisher of the Nilson Report, which tracks the credit card business.

People who routinely pay off their credit card balances have been enjoying the equivalent of a free ride, he said, because many have not had to pay an annual fee even as they collect 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 have the broad effect of encouraging card issuers to become ever more reliant on fees from marginal customers as well as creditworthy cardholders — “deadbeats” in industry parlance, because they generate scant fee revenue.

“They aren’t charities. They have shareholders to report to,” he said, referring to banks and credit card companies. “Whatever is left in the model to work from, they will start to maneuver.”

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 usury laws in some states, and the ready availability of credit scores in the late 1980s, banks began offering cards with a variety of different interest rates and fees, tying the pricing to the credit risk of the cardholder.

That helped push interest rates down for many consumers, 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 customers and lowering their credit limits in earnest as the recession accelerated. Now, consumers who pay their bills off every month are issuing a rising chorus of complaints about shortened grace periods, new hidden fees and higher interest rates.

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

Citigroup and Capital One referred comments to the A.B.A. Discover and American Express declined to comment. Bank of America intends to “provide credit to the largest number of creditworthy customers possible, while also remaining prudent in our lending practices,” said Betty Riess, a spokeswoman. Together with JPMorgan Chase, which has said the changes will force it to limit credit availability and raise fees, these banks account for 80 percent of the credit card industry.

Banks are not required to publicly reveal how much money they make from penalty interest rates and fees, though government officials and industry consultants estimate they constitute a growing portion of revenue.

For instance, Mr. Hammer said the amount of money generated by penalty fees like late charges and exceeding credit limits had 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 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.

A 2005 report by the Government Accountability Office estimated that 70 percent of card issuers’ revenue came from interest charges, and the portion from penalty rates appeared to be growing. The remainder came 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 lawyer at Consumers Union.

“In order to do business under the new rules, they’ll actually have to tell you how much it’s going to cost,” she said.

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.

Austan Goolsbee, an economic adviser to President Obama, said that while the credit card industry had the right to make a reasonable profit as long as its contracts were in plain language and rule-breakers were held accountable, its current practices were akin to “a series of carjackings.”

“The card industry is giving the argument that if you didn’t want to be carjacked, why weren’t you locking your doors or taking a different road?” Mr. Goolsbee said.

Ron Lieber contributed reporting.

Reaper16
05-20-2009, 05:28 PM
Mmmmm... credit carbs. I don't care what Dr. Atkins says, they are delicious.

Mizzou_8541
05-20-2009, 05:38 PM
Wouldn't charging interest immediately after the purchase encourage credit users to pay their bill sooner than later?

HonestChieffan
05-20-2009, 05:43 PM
No, people who dont pay their bills will still not pay their bills.

Mizzou_8541
05-20-2009, 05:45 PM
No, people who dont pay their bills will still not pay their bills.

Yeah. Probably right. I guess I was assuming a certain level or responsibility and accountability...two things which this country is lacking

bango
05-20-2009, 05:48 PM
I heard that it was the companies that were going to chnage how they add interest to accounts. They are going to make it automatic with every use of the card, and not wait until the end of the cycle on the unpaid balance. It is not Obama doing this. It is the banks that are doing this. They are the ones that are trying to penalize everyone by making changes. Maybe they would not have done this if the Gov did not try to stop them from screwing us in other ways.

memyselfI
05-20-2009, 05:49 PM
I saw an article a few weeks ago that said the IRS is beefing up it's staff and resources to go after the little guy taxpayer who underpaid his taxes. Nevermind Obummer has a bunch of big guys who didn't bother sitting in his freaking cabinet.

KC Dan
05-20-2009, 05:49 PM
The answer, don't use credit cards! If you do, good luck to you.

memyselfI
05-20-2009, 05:55 PM
I heard that it was the companies that were going to chnage how they add interest to accounts. They are going to make it automatic with every use of the card, and not wait until the end of the cycle on the unpaid balance. It is not Obama doing this. It is the banks that are doing this. They are the ones that are trying to penalize everyone by making changes. Maybe they would not have done this if the Gov did not try to stop them from screwing us in other ways.

Obummer will get the credit or blame if he signs the bill.

2bikemike
05-20-2009, 06:13 PM
Wouldn't charging interest immediately after the purchase encourage credit users to pay their bill sooner than later?

Personally I pay my bill in full every month to avoid paying interest. If they start charging me interest immediately I will stop using credit cards. They already earn a percentage on every purchase you make and I charge everything. So if I have to I will go back to paying cash for everything.


I also earn frequent flyer miles and have taken advantage of that program. So it will suck to lose that but they aren't getting anymore of my money.

banyon
05-20-2009, 06:15 PM
I didn't read anything in that article about Obama forcing credit card companies to charge good ol boys like you a higher rate.

Mizzou_8541
05-20-2009, 06:15 PM
Personally I pay my bill in full every month to avoid paying interest. If they start charging me interest immediately I will stop using credit cards. They already earn a percentage on every purchase you make and I charge everything. So if I have to I will go back to paying cash for everything.


I also earn frequent flyer miles and have taken advantage of that program. So it will suck to lose that but they aren't getting anymore of my money.

I have been working very hard to cut the balances of my credit cards and I am down to $400 dollars. Next month's paycheck will be the last time I will EVER make a payment to a credit card company.

I'm not even sure I will maintain one for emergency purposes.

KILLER_CLOWN
05-20-2009, 06:31 PM
I saw an article a few weeks ago that said the IRS is beefing up it's staff and resources to go after the little guy taxpayer who underpaid his taxes. Nevermind Obummer has a bunch of big guys who didn't bother sitting in his freaking cabinet.

Ya i love it, paying taxes is for the poor/middle class.

KC Dan
05-20-2009, 06:41 PM
I didn't read anything in that article about Obama forcing credit card companies to charge good ol boys like you a higher rate.
He's not but as a result of this bill, they will...

Cannibal
05-20-2009, 06:46 PM
It's good to have one card for emergencies in my opinion. I only keep one card and the balance low or paid.

I have a friend with 7 cards though. He's a fuckin moron.

banyon
05-20-2009, 06:48 PM
He's not but as a result of this bill, they will...

Why don't they just not take on the riskiest people in the first place and that way they wouldn't be "forced" to shift the costs onto you poor guys? :hmmm:

Also, how have credit card companies fared over the past 25 years? Have they been struggling to stay profitable?

Mizzou_8541
05-20-2009, 06:56 PM
Why doesn't Michael Moore make himself useful and go after credit card companies?

banyon
05-20-2009, 07:43 PM
Why doesn't Michael Moore make himself useful and go after credit card companies?

There is an award wining documentary that probably beat him out:

http://www.maxedoutmovie.com/

That's not available online, but this British documentary does a decent job of exposing some of the more pernicious aspects of credit card lending:

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KC Dan
05-20-2009, 09:07 PM
Why don't they just not take on the riskiest people in the first place and that way they wouldn't be "forced" to shift the costs onto you poor guys? :hmmm:

Also, how have credit card companies fared over the past 25 years? Have they been struggling to stay profitable?
a) Not me bucko. I give the credit card companies NADA. I use cash or a debit card. Maybe onto you welfare man...
b) Yes, they make money that is what businesses are supposed to do to make profit and employ you. But, I will in no way EVER defend credit card companies. They are da debils.

2bikemike
05-20-2009, 09:09 PM
I have been working very hard to cut the balances of my credit cards and I am down to $400 dollars. Next month's paycheck will be the last time I will EVER make a payment to a credit card company.

I'm not even sure I will maintain one for emergency purposes.

Good for you! It took me about 3 attempts of paying off all my credit card debt and charging them back up before I became Credit card debt free.

IMHO it is good to have one for emergencies and reserving Rental Cars and Hotels.

banyon
05-20-2009, 09:19 PM
a) Not me bucko. I give the credit card companies NADA. I use cash or a debit card. Maybe onto you welfare man...
b) Yes, they make money that is what businesses are supposed to do to make profit and employ you. But, I will in no way EVER defend credit card companies. They are da debils.

That's great about your personal finances, but it really didn't address my question about the credit card company's choice.

Guru
05-20-2009, 10:28 PM
Well, I am one of those customers that charges everything and then pays the bill in full every single month to obtain the free points. The day they do this is the day I tear up my two cards.

Nightwish
05-20-2009, 10:56 PM
What's a credit carb? Is that some new program that pays us for eating high-carb diets? Where do I sign up?

mikey23545
05-20-2009, 11:03 PM
Pocket change you can believe in.

Hog Farmer
05-20-2009, 11:03 PM
Personally I pay my bill in full every month to avoid paying interest. If they start charging me interest immediately I will stop using credit cards. They already earn a percentage on every purchase you make and I charge everything. So if I have to I will go back to paying cash for everything.


I also earn frequent flyer miles and have taken advantage of that program. So it will suck to lose that but they aren't getting anymore of my money.


Yep. Me too! God Damn Obama! He's going to destroy the free enterpiise system !

KC Dan
05-21-2009, 12:03 AM
That's great about your personal finances, but it really didn't address my question about the credit card company's choice.Yeah, i did...

"They are da debils." That is the only response about the credit card companies that you will hear from me. And, i do mean it.

cookster50
05-21-2009, 06:13 AM
I heard that it was the companies that were going to chnage how they add interest to accounts. They are going to make it automatic with every use of the card, and not wait until the end of the cycle on the unpaid balance. It is not Obama doing this. It is the banks that are doing this. They are the ones that are trying to penalize everyone by making changes. Maybe they would not have done this if the Gov did not try to stop them from screwing us in other ways.

This. Anyone that blames the cc companies changes in what they charge those that pay their bills on Obama needs a brain transplant with a monkey.