June 13, 2009Judging by the clamor for the credit card bill and the general jubilation among credit cardholders and their supporters when President Barack Obama signed it this May, it could not have come at a more timely fashion.
The credit card bill is a very important and much needed piece of legislation for credit cardholders. Already burdened with the economic recession and the employment crisis, credit cardholders were staggering under the weight of rising interest rates and fees that credit card companies, themselves trying to stem the tide of the bad economy, were giving out every month. Unfortunately, while the bill has already become law, credit cardholders will still have to hold out for a few more months before it actually becomes active. In the meantime, credit companies are doing everything they can to cover their expected losses due to the bill.
The credit card bill provides many changes in the credit industry which is supposed to benefit credit cardholders. These include more transparency for credit card company practices, a tighter hold on the capability of credit companies to raise interest rates and fees and more control on who can and cannot be offered credit cards. Legislators expect the bill to bring a lot of benefits to cardholders. However, industry watchers see some negative side effects when the credit card bill becomes active.
Obviously, credit card companies are going to lose a lot of profits when the bill goes active. They will be seeking out ways to make up for those lost profits. The bill does not set a cap for interest rates or banking fees and provides no price control. This may be one way where credit card companies could make up for their losses. Cardholders can expect a higher starting interest rate and higher banking fees. Annual fees are going to be much more common for credit cards as well.
Credit cardholders who keep up with their bills, while they seem to be good customers, actually do not generate enough profits for credit card companies. As a result, many perks that they’ve been enjoying such as reward programs and more attractive interest rate offers will probably be ended. They won’t be exempt from high initial interest rates and fees either and they will probably be burdened with annual fees too, if they are not already.
While credit card companies will lose their capability to arbitrarily raise interest rates, they will still be able to raise it as long as they provide notifications according to the requirements of the credit card bill.
To avoid difficulties in the future, credit cardholders should do their best right now to pay off their debts, keep their debt balances low and use their rewards points as well.
Still, the whole doom and gloom credit scenario does not mean that you should just stay home and not spend on anything, even the necessities. There is still some good things left, credit-wise and, as long as you are smart and careful, you can make the best out of them. Try out these tips to see how you can do that.
During the past few years, the credit card industry has enjoyed high profitability. Many see that this is coming to an end. Although many see the credit card bill as the main reason for this, it may only be one of many factors.