The credit card industry is in an uproar over the legislations in the recently passed credit card bill. The credit card bill is aimed at legislating many credit card industry practices that cardholders see as unfair and deceitful. For the credit card industry, the credit card bill is a disastrous piece of legislation which will destroy their profitability and, according to them, limit the available credit for American consumers.
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.
Although the credit card industry is currently preoccupied with the threat of the credit card bill legislations, it is important to remember that the profitability of the industry was already going down even before talks of the credit card bill surfaced.
With the economic crisis, credit cardholders were unable to keep up with their monthly payments. Whereas many of those who struggled with credit card debt were able to at least keep up with the minimum monthly payments, they were ultimately defaulting when the economic crash came. The increase in credit card debt defaults greatly hurt the credit industry. Aside from that, it also proved wrong one common boast in the credit card industry: their capability to analyze a borrower's risk and balance with the right interest rate.
Credit cardholder dissatisfaction over high interest rates and large financial fees is also another factor to consider. Considered the root cause of the credit card bill and its popularity, the dissatisfaction of credit cardholders over many of the practices of the credit card industry has been going on for some time. It was only a matter of time before the issue blew up on the credit card industry.
Now, with the credit card bill in place, credit cardholders are going to get the changes that they have been clamoring for. Unfortunately, many of these changes are going to hurt the credit card companies. The legislations on full disclosure of agreements and restrictions on interest hikes and financial fees will hurt the credit card industry the most.
In the past, the credit card industry has profited greatly from credit cardholders who were unable to pay off their monthly bills but did not default, only paying off penalty fees. The impact is hard to calculate, given the credit card industry's reluctance to release any figures. Many, however, consider the amount to be quite high.
The credit card controversies, coupled with the economic crisis, have also given American consumers a crash course on financial responsibility. Many of them are going to be more careful with their credit card purchases, limiting credit card industry's previously large profits from subprime borrowers.