Credit Card Companies Testing Consumer Tolerance As Credit CARD Act Approaches
As the activation of the Credit CARD Act approaches, credit card companies are trying to figure out what tactics will help them keep their profits without losing them their customers. A perfect example is the recent move of Bank of America to add on annual fees for a few of their credit card holders. Bank of America is not holding their annual fees in deference to credit card holders with good credit and neither are they punishing the subset of card holders who are getting the fees. What Bank of America is doing is trying to find out how much a burden credit card holders can take before giving up on their credit card companies.
Notably, unlike some of its contemporary big name credit card companies, Bank of America has promised that it will no longer raise its interest rates ahead of the Credit CARD Act’s activation which will introduce sweeping changes to the credit card industry. However, if the recent introduction of annual fees to a small percentage of its customers is any indication, Bank of America will not be standing still when the Credit CARD Act’s changes hit either. Instead, it seems that the credit card company will be testing the waters, probing what will work and what will not in terms of keeping its profits and its customers.
Anne Pace, spokesperson of the company said, “What we’re trying to do is get a better understanding of the value the customer places on the card. Right now, it’s still too soon to tell what impact the new rules will have.”
Bank of America’s actions could well be indications of things to come in the credit card industry. The following twelve months will be critical to credit card companies as they look for unexplored avenues of profit as the Credit CARD Act closes down their most aggressive – and oppressive – ones. The Credit CARD Act was created to protect consumers by banning credit card industry practices such as retroactive interest rate hikes, obscure credit card agreement language and what not. A major aim of the Act is to also cut down the high penalty fees that consumers pay to credit card companies every year which is estimated to be at $15 billion. Obviously, the Credit CARD Act is going to cut down a lot of profits for credit card companies.
Considering the current economic difficulties credit card companies are facing, it would be safe to assume that they would be looking at every opportunity to make a profit even with the Credit CARD Act in place. However, they will have to do so without the risk of losing their customers. The Credit CARD Act, among other things, will increase competition among credit card companies and it would mean hard going for credit card companies who make the mistake of pushing their card holders too far.
