The credit industry is understandably worried about the new credit card bill signed into law by President Obama last May. The credit card bill, an answer to the mounting clamor of credit cardholders burdened with increasing interest rates and fees, will put a number of restrictions to the credit card industry. Among others, the credit card legislation will disallow interest adjustments on existing debts, limit who the credit card companies can offer credit to and push for complete transparency on credit card contracts.
These restrictions that the credit card bill will introduce are seen by the credit card industry as highly restrictive. Credit card companies are already saying that the loss in profits due to the bill will be huge. As a result, they will be taking drastic measures to cover their losses such as increased APRs, cutting down rewards programs and the return of annual fees. Credit card companies will also be more restrictive on issuing credit which will mean a loss of credit for consumers. Although the credit card companies still have a few months leeway before the credit card bill becomes active, they are now implementing rule changes in preparation for it.
Competition among credit card companies remain at a healthy level, however. Capital One for instance is taking a different path towards maintaining profitability while dealing with the credit card bill.
Major credit card companies, including Capital One, have been issuing notices to credit cardholders of changes in APR and fees. This is in preparation for the industry regulation changes that will happen when the credit card bill becomes active. Capital One, however aims to be more attractive to credit cardholders and gain the loyalty of existing customers by deferring price increases.
Most credit companies who are issuing notices for APR and increases will be implementing these changes to within a few months' time from the date of the notice. Capital One, however will defer price increases for a period of time, which can be as far off as Janury 2011, before their increase takes effect. In the meantime, transactions being done before the “activation” time of the increase will be treated as promotional and no increase will be implemented.
This comes as a very welcome surprise for Capital One credit cardholders who are probably worried about the increases in APRs and fees of their other credit card lines. This move of Capital One also makes its credit cards more attractive to consumers especially at a time when consumers are very wary of credit cards and are apt to be more critical on their credit card payments.