With the recent passage of the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (CARD), credit-issuing companies stand to lose a significant revenue stream, namely, penalty charges.
No one can reasonably believe these businesses will accept a reduction in their profits without seeking to replace that income elsewhere in their operations.
With the curtailment of penalty charges and seemingly arbitrary consumer interest rate increases, banks and credit card companies will likely try to recapture lost revenue through expanded fees and service cuts.
Here’s a list of services to watch for from your bank and credit card companies, as you may see an increase in fees or a decrease in services:
» Annual Credit Card Fees: “No annual fee” credit cards have been plentiful many years. This will likely be the first place credit card companies look to begin replacing some of their lost revenue. We’ve already seen one credit card offer with an annual fee of $500!
» Checking Account Fees: With the intended limitation of overdraft charges that have, until recently, approached $30 per occurrence, banks will likely curb their offerings of free checking accounts. Watch for monthly fees to reappear and/or increase, even for responsible customers.
» Standard Credit Card Interest Rates: With new restrictions placed on penalty fees, watch for standard interest rates to increase ahead of CARD’s implementation on February 22, 2010.
» Rewards Programs: Finally, all of those “points” and “miles” accumulated by using a rewards card are likely to earn fewer actual trips, consumer items and cash back.
Such are the unintended consequences of trying to “fix” problems in the credit card industry. We hope we’re wrong, but it may be a case where those who have managed their money and credit responsibly end up paying extra for the protection of those who have not.
In the end, though, we still recommend spending less than you earn, paying your credit card bill in full every month, and tracking your expenses.
If you have any questions, would like to discuss your financial challenges, or are just looking for advice, please call us at your convenience. As always, we are here to help and look forward to hearing from you.