Economics

Today is The First Day of The Rest of Your Life Under The Credit CARD Act. Which Means, Get Ready For All Sorts of New Fees.

|

Lo some nine months ago, Congress took a politically courageous stand against mom, apple pie, and credit card issuers by supposedly reining in the excesses of the latter (excesses which largely consisted of giving lots of people the ability to purchase goods and services on the automated installment plans otherwise known as credit cards). The goal of the new legislation was to clear the books, start anew, blah blah blah, and hem in the contagion known as excessive credit, which was widely believed to be behind the financial crisis that may or may not be over. And, at the same time, of course, Congress was going to make sure that all Americans had access to the credit that is our god-given birthright. The streets of America are paved with gold MasterCards and all that.

So now the new rules are in effect. And credit card issuers (banks, mostly) are now coming up with new ways to squeeze money out of customers, just like restauarants doubling up on corkage fees, extra charges for more butter, you name it. From a Cincinnati Enquirer account:

One of the latest is an "inactivity fee"….[a charge] if you don't use your bank credit card within 12 months….

Beginning April 1, Citigroup will assess cardholders a $60 annual fee if they charge less than $2,400 a year. "This action is necessary given the increasing costs of doing business," Citi spokesman Robert Julavits said.

The nation's second-largest card issuer, Bank of America, just began testing an annual fee for some of its credit card accounts.

The fees are part of a menu of little-known charges that card issuers use. In recent months, some have upped the fees for transferring balances. Some have added a minimum charge for cash advances, meaning a $50 advance on the credit card could cost the unwitting consumer $10 or more in fees.

Some are charging a dollar a month to customers who still want to get an account statement in the mail.

Consumer advocates, including politicians who have helped to created mega-gigundo deficits at the local, state, and national levels, have already started calling for the next round of regulations, in which villainous bankers, finally get their comeuppance. But sadly, just like Mr. Potter in It's a Wonderful Life, the people giving credit will always find a way to prosper.

"The credit card issuers can adjust their tactics faster than Congress can pass laws," said Joshua Frank, author of [a] report [for the Center for Responsible Lending].

Which is to say, the best way to ensure access to credit and decent treatment is by market competition, not by top-down regulation that stymies the development of many different types of credit instruments. No financial crisis is created by access to credit per se; it's created by real and presumed government bailouts of bad decisions made by folks with access to credit. I floated a decade of my life as a grad student and an underearning worker on easy credit. Without access to a ridiculous amount of revolving credit (thank you, interest-free balance transfers!), I would have not been able to take advantage of any number of educational and work-related opportunities (including covering moving expenses from Buffalo to Los Angeles to start working at Reason back in 1993).

Access to credit doesn't stem from card issuers beneficence but from their self-interest, which coincides pretty well with borrowers. Sure, lots of people get into credit-card and other forms of debt that cause problems. But it doesn't help the far-larger majority of people to limit what can be offered. And, as the quote above suggests, Mr. Potter always gets his fees one way or another. Hell, even George Bailey ended up squeezing his customers for what appears to be an interest-free loan.

But that won't stop regulators for pushing for the next level of regulations which, if they do their job properly, will limit competition and increase costs to all borrowers. Thanks, fellas!

The Center for Responsible Lending and others are pushing to enact a proposed Consumer Financial Protection Agency as the best way to stop credit card companies from inventing new ways to charge their customers.

Whole thing here.

Want to know why a Consumer Financial Protection Agency is a bad idea? Take 10 minutes to get the full pitch:

NEXT: Reason Morning Links: Anthrax, CPAC, Cars, and Darfur

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. “Consumer advocates, including politicians who have helped to created mega-gigundo deficits at the local, state, and national levels, have already started calling for the next round of regulations, in which villainous bankers, finally get their comeuppance.”

    And that’s the rub, isn’t it?

    Fuck something up in the first place, pull the wool over the eyes of the idiots and ignorant, and then cry foul against whichever entity you’re trying to gain control over along side those same idiots and ignorant groups when what you’ve done is the cause of the negative effect on the idiots and ignorant. Slick.

    My comments in the morning links thread about zombies applies even more after reading this.

    +1 for the entry Nick.

    1. Consumer advocates, including politicians…

      Not to mention the MSM. The morning reviews are in: they’re fully behind the act! The verdict: credit card companies are evil, consumers are stupid, the federal government is a benevolent, avenging Robin Hood.

  2. Citigroup will assess cardholders a $60 annual fee if they charge less than $2,400 a year. “This action is necessary given the increasing costs of doing business”

    Now *that* is funny!

  3. Wow, thanks for the heads up on inactivity fees and the like. I have a few cards lying fallow at this time.

    1. Make sure the accounts are actually closed and not merely inactivated. Citigroup almost got me on that one.

  4. As long as these same banks gorge themselves at the federal funds window, i have no issue with restrictions on their practices.

    1. I’ve been saying for a while (and so have others), that the way to regulate banks, is to eliminate the “lender of last resort”, known as the Federal Reserve.

      Christ, that still makes me laugh. Lender of last resort. Yeah, right.

    2. Why? Did you not get the point where those restrictions hurt everyone, especially consumers? Would you break your own leg to give your enemy a black eye?

      1. The legal counterfeiter, also know as the Federal Reserve, hurts everyone, by inflating the monetary supply. Or did you miss that lecture at the Austrian School?

        http://www.youtube.com/watch?v=iYZM58dulPE

        1. Sorry billy-jay, I thought you were replying to me at first glance.

          Damn embedded comments!

  5. I got a credit card statement a couple weeks ago for a card that i paid off and canceled in 2001. I thought it was kind of funny at the time, but now i’m worried.

    1. Wow, that’s awful, Xeones.

      Hope you have an *active* card to handle the $60 times 9 years plus interest and penalties.

      Well, I’m off to check what’s not in *my* wallet.

    2. Do you have any documentation backing that up? I’d call them ASAP and see what’s up.

      Good luck X. Hope it’s just a dumb snafu mang.

    3. The account may be merely inactivated, not closed. I got a letter from Citigroup saying they would charge me fees on an account I *thought* I had closed in December. Turns out it wasn’t really closed.

      1. We “closed” our AmEx accounts months ago, when they called on a Saturday morning to insult us. I’ll be checking to make sure those accounts are truly closed. I don’t put it past the sons of bitches to try anything – they’ve already increased our interest rates twice since our cancellation.

  6. The most effed up part of all this is that the credit bureau oligopoly will penalize you for closing unused or lightly used cards and thereby reducing your credit used to credit available ratio.

    1. Not true.
      I do that all the time, and i recently checked my credit report, and there was nothing on there to indicate a black mark for closing accounts.

      Moreover, if you have ltos of open credit lines, you’ll be less likely to get a good credit line when you open a new account.

      Close them.

    2. We closed all of ours, and I took a loan from Dell for a netbook, just to have a little something. It seems to have worked, my score’s gone up.

  7. “The credit card issuers can adjust their tactics faster than Congress can pass laws”

    Just repeat this to yourself over and over.

    1. The obvious solution is to appoint a federal Credit Card Czar with unlimited discretionary power to prohibit bank practices he or she considers to be unfair, with no Congressional red tape to get in the way.

  8. Thanks Nick, this is a great post. I never read your published warnings, but I predicted the same thing.

    Of course, I want the profits in credit cards to be driven to zero, as they should be in a mature industry, but the stockholders don’t agree.

    To my mind, they ought to be quite happy with the 1-4% fee they collect from the merchants for every transaction, and shouldn’t be relying on fees and interest from borrowers. If you can’t run a profitable business on 1-4% from every purchase your customers make, then you are doing something wrong.

    Regardless, when Congress steps in, things get worse for us.

    On the win side of the “you win some you lose some” ledger, I did get Citi to cave this year on the previously existing $750 “fee” for the “privilege” of paying my own real estate taxes and insurance, and no longer having Citi escrow them for me (such helpful fellows) via add-ons to regular mortgage payments. The customer service rep pretty much admitted this change was due to the new political reality (i.e. that Congress was probing their a$$es with red hot pokers at the time).

    1. Visa / Mastercard make the money on the merchant transaction charges; the bank card issuers like BoA & Citi make the money on the interest and fees.

  9. I got an offer for a Chase card in the mail for my business. On the front of one of the pieces of paper were all of the wonderfully low rates and fees and benefits. Then I turned it over and read the fine print.

    Somewhere in the middle was:

    We reserve the right to change any part of this agreement, for any reason.

    We reserve the right to change the interest rate at any time.

    OK. Thanks for that bit of information. Do you also reserve the right to give me a Caligula style fist-fucking?

    1. Yes.

      However, that requires notifying you in writing 45 days prior.

      1. Quit your whining, or we’ll skip the lard when it comes your turn.

        …Ah, fuck! Bring that last guy back in. I lost my ring.

        1. I lost my ring.

          Nah. That’s part of the rewards program.

    2. That seems to be part of just about every credit card contract. That is why I have never been able to bring myself to sign one of those things.

    3. That’s normal on every credit card contract.

      They are, however, required to notify you in advance when they change the terms.

      My Chase card is still giving me cash back, btw. With no fees.

  10. Got the Citibank mailing informing me of a $60.00 annual fee and a helpful 1-800 #. Couldn’t cancel the account fast enough.

  11. And two words that always need to be said when talking about banks.

    “Credit Union”

  12. Good luck X. Hope it’s just a dumb snafu mang.

    Yo, thanks. It probably is, but i’m hoping i didn’t just shred the thing and throw it out. I am not paying $60 a year for a card i cut up when i was 20.

  13. The free market will clean this up. We have the choice to cut up and cancel these cards and find Banks and Credit Unions that don’t bang us with these fees. The Government is playing the class card again, Big Bad Bankers.
    Maybe Obama can create a new oversite committee and have bipartisan debate about the fees and show it on C-Span.
    http://www.suckitupcrybaby.com

  14. In light of this and other stories, I am seriously wondering how long it will take before companies/employers abandon the fiction that your credit-score number actually says anything about your financial trustworthiness or lack thereof. Several months ago there was a time period wherein you could hardly go 24 hours without the Consumer Reports blog posting the latest story about “X credit card company cancels accounts of cardholders in good standing” or “Y credit card company reduces cardholder credit limits by 90 percent,” both of which lower credit scores. And now, I expect there’ll be folks canceling dormant accounts, and THAT will lower their credit score too.

    Thing is, credit scores supposedly show your ability/willingness to pay back debt, yet what they REALLY measure is your ability and willingness to take debt on.

    1. Yep, if you never take on debt, you dont even have a credit score.

      1. But even if you have a credit score, it’s utterly worthless. Remember a couple months ago, a Reasonoid — Tim Cavanaugh IIRC — did a post talking about how foreclosing on a house dinged your credit score 200 points, whereas he lost 100 points just for being a tad late paying a phone bill? Seriously: a system which says “Foreclosing on a house is no better and no worse than two late phone-bill payments in a seven-year period” is beyond asinine. And income and assets don’t even count! A guy making (for example) $50,000 a year with $40,000 in the bank, but two late utility-bill payments, has a lower credit score than the guy making $20,000 a year with $0 in the bank, but he’s paid every one of his utility bills on time.

        1. And thanks to the malignant magic of threaded comments, I not only cross-posted with the Contrarian, but my comment appeared before his. Oops.

    2. Couldn’t agree with you more. Your credit score has nothing to do with your wealth. It has everything to do with how wealthy you’re making a credit issuer. So having a high credit score basically means you probably don’t have much actual money.

      The credit score is made up of indicators derived from your available credit, credit payment history, types or credit, and other miscellaneous credit information. Nowhere in there is there anything about net worth, available cash, or anything else. It’s amazing that we’ve allowed this number to become so important in society.

      1. Both you and Jennifer are right. Seems a real credit # would consist of 4 characteristics:

        1. Total net worth
        2. Income
        3. Current debt level
        4. History of bill/debt payment

        #4 being important, in that having filed bankruptcy recently or being foreclosed upon should make you virtually unloanable. Late payments should knock you down a bit.

        The other 3 are obvious.

        1. Verifying #1 and #2 requires the cooperation of entities that have no interest being involved in the credit reporting system.

          1. Self-reporting. I had to hand over tax returns for business and personal and copies or investment holding for past mortgages. Admittedly, turning that stuff over everytime you wanted a new credit card would be a pain, but Im ok with that.

            1. Most people wouldn’t be. And on this topic, the market has pretty heavily decided that it’s too much of a hassle.

              1. I agree it is too much of a hassle, but Im okay with it, I just wouldnt get a credit card anymore.

            2. And we’re not just talking about credit cards — we’re talking about renting a new place, applying for a job, turning the electricity and heat on at your new place, getting a new cell phone, …

              1. When I last rented in 1997, all they wanted was my current income. I probably had an okay credit score too, if they had checked, but Im pretty sure they didnt.

                When applying for a job, they really dont need to know my credit score. WTF? If they give my the job, I will be able to afford stuff.

                Cell phone has never checked my credit score either, as far as I know. But my business has paid for that for the last 10 years, so maybe things have changed.

        2. I was required to show all four to get my recent mortgage. My credit report covered #3 and and part of #4. I had to show proof of #2 as well as the remainder of #4. And I did have to show a bit of #1 despite my 20% down.

      2. Bond rating is similar bullshit. If you’re going to invest in bonds, you might as well buy short-term junk, after checking to see if the company has enough cash and cash flow to cover expenses for the time period.

    3. While there are weirdities in the credit score, they do provide a fairly good picture of your credit worthiness.

      A comprehensive personal, face-to-face, financial document examining, interview with the applicant is still the best way to determine credit worthiness, but it’s damned expensive. So you use their FICA scores. And you would be STUPID to give a loan to someone with a score of 100 while turning away someone with a score of 800.

    4. I don’t know. I allways pay off my balance, and am not carrying any debt, and my credit score is like 990 or something (can’t remember what it was). So I think this notion that paying off debts lowers your credit rating is a myth.
      Anyway, you credit report is not just a score, it’s a list of people who have given you credit and whether you were ever late or didn’t repay it.

      1. Hazel – if you have credit cards on which you charge frequently, so that you always have a balance to pay off, of course you will have a high FICO score. But if you don’t have credit cards at all, do all business in cash, and don’t have any other debt (for example, if you pay rent or you own your house free and clear) that is reported to the credit reporting companies, then your score would eventually go down. No credit activity (charges and payments) = nothing to score you on = no score. Dave Ramsey says his FICO score is 0. FICO scoring depends on you having at least temporary debt, even if you pay it off on time, because it requires payment histories on accounts to come up with the score.

        1. Yeah, but I was responding to the notion that cancelling dormant accounts would lower your credit score. I *regularly* cancel dormant accoutns. There’s no other way to keep getting 0% introductory rates.

        2. Yeah, but I was responding to the idea that cancelling dormant accounts would lower your credit scors.

          Not in my experience, I do it all the time. No other way to keep getting those 0% card offers.

          1. If you cancel cards that you’ve had for a relatively short time, it won’t hurt you. If you cancel one you’ve had a long time, that will reduce the average life of your credit card accounts, and will hurt a bit. The key is the average time your active credit card accounts have been open.

  15. The Center for Responsible Lending and others are pushing to enact a proposed Consumer Financial Protection Agency as the best way to stop credit card companies from inventing new ways to charge their customers.

    *guffaws, slaps knee*

  16. I’m confused. People are acting like a credit card is some kind of necessity like food, clothing, and shelter. I’ve had no credit card since 1997 and I function remarkably well in society. The fact is that the credit card industry is a predatory operation by its very nature, so I can’t for the life of me understand why people get upset when they engage in predatory practices. It’s like being mad at a lion when it eats a gazelle.

    I take great issue with the statement that the vast majority of Americans use their credit cards “responsibly”. The average household credit card debt is above $7000. That’s the average. The median household income in America is about 50k, meaning that (roughly, as comparing median to mean is not exact) the average U.S. household has about a quarter of their average annual after tax income tied up in revolving, high interest debt. That’s hardly a responsible majority. Add on car payments and the like, and it’s easy to see why the average American has no money in any real sense. Any competent financial planner will tell you that debt is the major cause of most of their clients having financial difficulties.

    The fact is that the explosion in available consumer credit has bankrupted the American consumer. We’ve been sold debt as a product, so much so that many people’s financial lives now revolve around their credit score, rather than how much cash flow or liquid investments they have at any particular moment. The average American household has no real money. Most of us live paycheck to paycheck. Sure we might have a 401k or an IRA, but those cannot be accessed without severe tax penalty in the event of an emergency. If you lose your job (as many of us have found in the last couple of years) those bills don’t stop coming. The industry has no pity or compassion. And you do legitimately owe the money, so it’s hard to feel really sorry for you. Hello, bankruptcy filing.

    I contend that the root cause of most of our personal financial problems (as well as our nation’s, but that’s another discussion) is debt and its ramifications. As a society, we need to get off the perpetual earn, borrow, and spend to consume treadmill. If we don’t change, we’ll keep getting more of the same results.

    1. “It’s like being mad at a lion when it eats a gazelle.”

      LMAO- well said!

    2. In some ways a credit card IS a necessity, if you ever want to rent a car, or a room in a respectable hotel, or things like that. I haven’t had a credit card in years as a matter of principle, yet I confess the main reason I’ve been able to do this without undue suffering is because when I go on vacation, my boyfriend/domestic partner/roommate/whatever puts the hotel bills on his credit card.

      And of course, despite having no debt and a bank account balance more than double my annual pre-tax salary, my own credit score hovers somewhere between “Sudanese refugee” and “Down’s syndrome crack whore.”

      1. In some ways a credit card IS a necessity, if you ever want to rent a car, or a room in a respectable hotel, or things like that.

        Ive got to call BS on that. I use a CC for those things myself, but Dave Ramsey* claims to have no problems and he travels a hell of a lot more than me.

        *yes, an appeal to authority, deal with it, just becuase its a logical fallacy doesnt mean its a practical fallacy

        1. I think it’s because Jesus is his co-signer. 🙂

        2. It’s true. We haven’t had a credit card since 2000. We’ve taken flights, rented cars, stayed in nice hotels using a debit card – it’s no problem as long as you keep a decent balance to cover any holds on the card.

          Problems with credit always come back to personal behavior unrelated to how much income a person has. Instant gratification about having stuff and procrastination about paying for it come to mind.

      2. You can use a debit card in place of a credit card for those things where it’s required. I no longer have any credit cards.

        1. @BakedPenguin – I agree, debit cards work just fine to reserve hotel rooms and rental cars and to buy airline tickets online. If you have the cash, you are still free to spend it. That is, until Congress comes up with some law against it!

      3. Down’s syndrome crack whore…awesome.

        1. I refuse to Google that.

    3. “”I contend that the root cause of most of our personal financial problems (as well as our nation’s, but that’s another discussion) is debt and its ramifications. As a society, we need to get off the perpetual earn, borrow, and spend to consume treadmill. If we don’t change, we’ll keep getting more of the same results.””

      I agree, but sadly, if we stopped using credit our society will collapse. Stores would close, and unemployment would skyrocket. Our nation’s economic well being is based in spend and spend some more.

      Why do you think the Bush admin wanted us to keep shopping after 9/11?

      1. I agree, but sadly, if we stopped using credit our society will collapse. Stores would close, and unemployment would skyrocket. Our nation’s economic well being is based in spend and spend some more.

        Fortunately, this is bullshit and is easily provable. Debt spending does not increase consumption, because it cant. Consumption is limited by production. Debt merely shifts the consumption from the loaner to the loanee. Banks loan the money via credit card to allow consumers to spend, instead of the money being spent by the investors in the bank. They increase their consumption in the future by putting off consumption today. Users of debt consume today with decreased consumption in the future.

        1. “”Debt spending does not increase consumption, because it cant. “”

          You got it backwards. Consumption equals greater debt spending. I’m saying our economics is based in consuption, and when we cut back on consumption, jobs are lost.

          1. It’s true that our economy is based on consumption to a large degree, but when your disposable income is tied up in debt payments, you can’t consume much. When you finally bankrupt on that consumption, your creditors don’t get paid, which means they must increase fees on other users or increase their prices, meaning that your net contribution to the economy is zero, or at least much less than it could have been if you were paying cash.

          2. No, I dont have it backwards. Consumption cannot exceed production. How can I eat an apple that no farmer* has grown?

            *wild apples still have to be picked, unless it randomly falls off a tree thru a peeler and then bounces into my mouth.

            1. If “our economy” is referring to the US economy, it’s quite easy to see how consumption can exceed production — we import more than we export.

              If you’re referring to the global economy, then the supposition is totally off-base, as far more people globally are worried about how they’re going to find something to eat today than are worried about their consumer debt profile.

              1. There is only 1 economy.

                Also, imports and exports balance. For example, back in the 80s we imported electronics and cars from Japan and they imported Hawaiian golf courses and NYC skyscrapers.

                Some people are too hung up on physical location.

                1. That real estate and those skyscrapers don’t count as “production” in any meaningful sense of the word. And the T-Bills that we “export” to the PRC are certainly not “production”.

                  1. T-bills arent production, agreed, they are the loans, but that is transferring consumption from China/Japan to the US – still balances. Buildings and golf courses clearly are produced goods. The raw land underneath isnt.

                2. In other words, from the viewpoint you’re espousing, you statement that “consumption is limited by production” means that consumption can only occur until we sell off every square inch of American soil and flood every foreign bank with as many T-Bills as they are willing to take. Not much of a limit in practice.

                  1. I didnt mention T-bills, you did.

                  2. Consumption is limited by the amount of stuff that is produced. Selling or borrowing just shifts it from one person to another. Whether that person is chineses or japanese or american is of no interest to me in this discussion.

                3. But delivering pizza for cash tips in a 1988 honda civic, that i bought off a little old lady for cheap, made me more % profit off my investment than those skyscrapers and golf courses. I miss college. And its all a big pyramid scheme; realize that and you’ll never be on the bottom. And with the right intent, you can jump off the scam completely. “Not built to last, built to burn. No deposit, no return.”-PWEI That civic’s deck wore out more than a few tapes in its lifetime.

            2. “”No, I dont have it backwards. Consumption cannot exceed production.””

              Who’s talking production? You’re way off base. I’m talking about the amount of spending (consumption)we need to do to keep stores open and people employed.

              A lot of people buy widgets they couldn’t otherwise afford on credit. If those people moved to the idea that if you can’t afford it, you shouldn’t put it on credit, sales of widgets would drop, revenue would drop, layoffs would result.

              1. And the people who loan the money would buy some other type of widget since they dont have anyone to loan to anymore.

                There would be a shift in consumption, not a drop in consumption.

              2. The reason I mentioned production is that it determines how much will be consumed. Loans and etc determine who and what will be consumed, but not how much.

                1. Production does not determine how much will be consumed. Companies have lost money producing shit that won’t sell.

                  It may determine the outer limit of consumption being you can’t consume more than is produce. But you would be foolish to think when someone produces X number of units, then X number is sold.

        2. Absolutely agree. Additionally, we wouldn’t just stop using credit on some random day. What we would need is a gradual sea change similar to what brought us credit in the first place. The credit card has only been in existence since 1958 and it took quite a while before it was even available to most Americans. Any abandonment of credit would be similar in being a gradual shift, meaning that our economy wouldn’t collapse, the sky wouldn’t fall, and we’d all be a lot better off.

          1. “”Any abandonment of credit would be similar in being a gradual shift, meaning that our economy wouldn’t collapse, the sky wouldn’t fall, and we’d all be a lot better off.””

            If it was gradual, I would agree. But if everyone woke up one morning and decided to get out of debt by freezing their spending and work on paying the balance off, stores would lose business, some would close, people would be laid off.

            1. Sure, and a few months later they would get hired at the new place selling goods to bankers who now had money to spend instead of lend.

              1. You seem really optimistic on unemployment.

            2. Yeah, but how likely is it that all Americans will on one day just stop using debt? That’s a fantasy. In reality, we would shift back to more of a pay as you go mentality over a long period of time.

              1. “”And the people who loan the money would buy some other type of widget since they dont have anyone to loan to anymore.””

                Oh, they won’t. We are nation that loves debt. We will fight tooth and nail to be able to have debt. Or to put another way, our President will do whatever to keep the credit flowing. If you are maxed out on debt, they will find a way to keep you spending.

              2. A credit card is a good thing if you don’t abuse it.

    4. @Contrarian P: The average credit card debt is highly misleading, because a few people with large balances drastically shift the average higher. According to Federal Reserve data, most American creditcardholders carry zero balances; those that do carry balances typically (i.e., the median) owe less than $2,000; only one in 20 households owe more than $8,000.

      See: http://tinyurl.com/d88ck

      I agree that it’s important, at an individual level, for people to have a good understanding of debt and how to use it responsibly. But demonizing it in the way you’ve done doesn’t strike me as very productive, and at a political level is most likely to punish people who need it the most.

      1. If most American credit card holders carry zero balances, the median balance is $0.

      2. “The average credit card debt is highly misleading, because a few people with large balances drastically shift the average higher. According to Federal Reserve data, most American creditcardholders carry zero balances; those that do carry balances typically (i.e., the median) owe less than $2,000; only one in 20 households owe more than $8,000.”

        Must be why we have so many bankruptcies in this country. Everybody pays off all their debt each month. Also must be why there are so many debt settlement commercials all over my television and radio. Debt just isn’t a problem.

        “I agree that it’s important, at an individual level, for people to have a good understanding of debt and how to use it responsibly. But demonizing it in the way you’ve done doesn’t strike me as very productive, and at a political level is most likely to punish people who need it the most.”

        It is very possible to live without the use of credit cards and revolving debt. I used to do financial planning for a living. Overwhelmingly, my clients who carried credit card debt were less well off on their overall balance sheet than were those who didn’t. That was regardless of if they had high incomes or lower incomes.

        Revolving debt does not in aggregate help the consumer, so I suppose if you say that is me “demonizing” debt so be it. Debt on an appreciating asset such as a mortgage or (possibly) an education is a different discussion altogether, although the argument can still be made that it can be harmful in those arenas as well (particularly if your home is overvalued).

        My philosophy on debt is that it is a whole lot like a loaded gun. There are times when people use it for useful purposes, but unless handled very carefully it can do great harm. That’s why they have gun safety courses. Unfortunately there aren’t very many debt safety courses around.

        1. @Contrarian said: “Debt on an appreciating asset such as a mortgage or (possibly) an education is a different discussion altogether, although the argument can still be made that it can be harmful in those arenas as well (particularly if your home is overvalued).”
          Yeah, and I haven’t heard of anyone having THAT problem recently…

        2. In my opinion, you should *never* carry a balance on credit cards. Credit cards are to be used merely as a conveient way of making online purchases and avoiding carrying around a lot of cash.

          If you can’t pay off your credit card balance every month, that means you are spending too much.

  17. Yeah buddy. The banks ALWAYS come out on top so rest assured they are ready to stick it to Main Street America once again!

    Jess
    http://www.online-anonymity.vze.com

    1. Of course Main Street America goes begging to the banks to let itself be screwed. I doubt anyone holds a gun to your head to make you do business with Bank of America or Chase. If you don’t want to get eaten, stay out of the tiger cage.

  18. The credit card issuers can adjust their tactics faster than Congress can pass laws

    Those of us in the Professional Regulatory Avoidance Compliance Community call this the jello principle. Regulations are like a brick sitting on a big blob of jello. The jello just squishes out from under the brick and business continues.

    1. I prefer the less sticky Whac-A-Mole Principle. Also, I like bananas in my jello so the analogy doesn’t carry the same kind of heft for me.

  19. These new laws likely won’t affect any member of Congress. So, what do they care?

    Now, they can tell their constituents that they did something.

  20. It’s funny how some people seem to think credit is the ticket to prosperity, until they take on more than they should, and then it’s the bane of the working class…

    This is the epitome of the nanny state. It’s worse than the Drug War and worse than anti-smoking laws in its own way…

    The Drug War and anti-smoking laws are largely inflicted on on unwilling participants. Smokers generally don’t ask for anti-smoking ordinances. Drug users don’t ask for the Drug War. …but people who use more credit than they should generally do want the government to save them from themselves. …and that’s disgusting.

    For people who think they had no choice but to take on more debt, the world will be an even darker place when there are even fewer choices available. …and how could the reaction of stuff like this be anything but restricting credit to people on the lower end of the economic spectrum?

    Fewer choices available to us… How could that possibly be better for any of us? Unless you’re a true believer in the nanny state. Isn’t that what nanny statism is all about?

  21. Oh, and by the way, it’s interesting too how some people seem to think the government should step in and prohibit people from taking out subprime home loans they can’t afford, under the guise of a new loan commission for “consumer protection”. …and yet out of the other side of their mouths, some of the same politicians are saying they need to crush credit card companies because they’re making obscene profits.

    But except for the government bailouts of one and not the other, the models are the same!

    Whether it’s low income individuals looking for credit by way of credit cards, first time home buyers who couldn’t have gotten into a home with a traditional loan, or small growing companies that couldn’t have gotten credit otherwise…

    Pooling high risk individuals and companies and charging them sufficiently to cover the costs of those who go bust is one of the greatest innovations of modern man.

    And just because our politicians stupidly used the money of people who weren’t involved in those transactions to bail out the investors who extended credit to those risky borrowers, is no reason to turn the credit tap off to the people who need credit most.

    We’ve got some real buffoons running things around here if they’re trying to think up new ways to stop investors from extending credit to small businesses and people on the low side of the economic spectrum. …our unemployment rate won’t improve much, and we won’t see a lot of new good paying jobs created until investors start extending credit to riskier borrowers again…

    Why would we slap the hand that’s trying to feed them?

    The only plausible explanations I see are a) the people running our government have no idea what they’re doing, b) they don’t care whether what they do hurts the economy if it means they get a few more votes come November and c) both (a) and (b).

    1. Sorry, but I couldn’t disagree with you more. Small business, who does most of the hiring and employment in this country, does not depend on credit to hire employees. It depends on profits. When consumers spend money, business can go hire more people. If you borrow money to hire more people, your business will fail unless you can increase receipts to not only pay those people, but service the debt. As it is impossible to predict exactly when your income will increase, this is a bad strategy. Cash flow and cash reserves are the key to business success, not available credit.

      1. That’s not always so — most of the time you need to expand your business first in order to make the profits necessary to hire more people. But of course expanding your business requires hiring more people, hence the need for credit. Without access to credit a lot of small businesses would not be able to do this.

        1. Again, that is a recipe for business failure. When you borrow you must service that debt. If your receivables do not give you enough cash flow to do that, your business will close. Especially in a down economy, you have no good way of knowing for sure when your cash flow will increase to cover the cost of the debt you accrue.

          1. Nobody beats the Wiz,

            But themselves.

            Some companies depend upon credit to make payroll, often as a temporary measure, those who rely on it usually fold, but that could take a while.

      2. “Small business, who does most of the hiring and employment in this country, does not depend on credit to hire employees.”

        Small businesses are more dependent on credit than larger ones. …and most certainly for growth. Growth being the operative word when we’re looking for more employment and high quality jobs.

        The growth in the early ’90s came from small software, hardware, media and telco companies that turned into whole industries. …and getting them the credit they needed was what their success was all about.

        The next wave of high paying jobs at growing companies will come the same way. We won’t get to where we want to go–we won’t get anything but comfortable with a new, higher misery index–unless we stop shooting at our lenders’ feet.

      3. Small business needs credit for payroll.

        We’re in a frickin’ recession. Companies are sliding their payments as long as possible. In good times, you can get cash in 30 days w/1.5% per month (net 90 days). Nowadays, you’re lucky to get your first payment in 90 days. Meanwhile, your employees still gotta eat.

    2. Where is the government STOPPING people from taking out home loans?? They are encouraging them to take them on, and then giving them loan modifications after they default.

      The governments policy is to keep housing prices high, while simultaneously making it easier to “afford”* housing by relaxing loan conditions.

      (*Deffinition of “afford” revised to mean “could possibly get a loan to purchase”).

      1. “Where is the government STOPPING people from taking out home loans??”

        There’s a coordinated effort. It’s coming from a lot of directions. It isn’t all explicit. Some of it takes the form of hammering on executive compensation, some it takes the form of one time punitive taxes, some of it having to do with breaking companies up… Anything having to do with a financial institution’s bottom line, of course, affects its ability to source, underwrite and place credit.

        If you’re looking for something specific to home finance, you might take a gander at these two proposals that won’t seem to die…there are proposals on the table to write minimum down payments in stone, to set minimum lending standards in stone…there are proposals to have a “consumer safety commission” approve financial products the same way the FDA approves medications…

        http://en.wikipedia.org/wiki/S…..egulations

        http://en.wikipedia.org/wiki/S……28FPSC.29

        …all of it, of course, is harmful to the economy.

        For some reason though, there doesn’t seem to be any legislation that would forbid the government from using tax payer money to bail out private financial institutions. You’d think that would be the first thing they’d do, but I guess that would mean they were part of the problem, and that’s obviously impossible!

        I should say too that setting minimum lending standards and minimum down payments seems really mean-spirited to me. Saying that financial institutions can’t lend to poor people if they found a way to make it pay, and they want to? What did poor people ever do to the politicians who want to vote for that? Gee, why not prohibit their kids from getting college loans while you’re at it?

  22. Hmm. The Citi fee blows. I have one of their American Airlines “Bronze” cards (miles earn at one mile for each $2 spent, but no annual fee) set up for EZ Pass refills (happens about quarterly), that ensures my 100K in AA miles don’t expire (36 months after last mile earned).

    Not worth paying $60 a year for the privilege. Looks like I’ll need to find a new way to keep my AA miles from expiring.

      1. We are planning a big trip in a few years when the kids are a better age.

  23. Let’s not forget the guns in national parks rider that I’m pretty sure was attached to this as well…

    1. To cancel the parks following state laws or to allow it (the Bush reg goes into affect today or next Monday or sometime about nowish)?

      1. I’m pretty sure that Bush had enacted it, it got stopped by the courts shortly after and then congress put it back in this bill. It should also just put national parks under the same laws as whatever state they are in.

        1. Yeah, which means Mammoth Cave is no open carry!!!! And I can legally conceal the next time I go camping.

  24. I refuse to Google that.

    SugarFree is no doubt on it, and will be providing links presently.

      1. “But I did find this little hottie on her wedding day…”

        If you like that, check out wedinator.com

  25. New business model- pay fees to keep your credit rating relevant. I’m not saying its not worth it, but i’m shocked, shocked that there are unintended consequences to the government telling credit card companies how they will do business. Idiots.

  26. I certainly don’t approve of the Act; Congress has no business meddling in these issues in the name of “consumer protection.” I as a consumer can protect myself better than Congress can, thank you.

    However, let’s be honest and acknowledge that these are not really “new” fees being charged by the banks. They’ve always been charging for these services… they just haven’t always been charging the same people for them. Congress is in reality mostly just shifting the fees from one set of consumers to another.

    The folks who pay their bill 100% each month have been getting in some senses a free service for several years now. They borrow money at no interest for up to about 30 days, and even earn “rewards” on that spending, yet have paid the banks nothing at all. It of course costs the banks to provide that service; they’ve just seen fit to pay for those folks’ free rides by betting that enough of them will fail and eventually have to pay their high interest rates.

    As I say, whether to do that or not should be up to the market, not Congress. But let’s be realistic about the limits of what Congress actually did here. It’s not creating new fees, it’s shifting them from one set of consumers to another, and in the most obvious example (the new annual fees), it’s mostly shifting them to a group which previously had been getting a free service, paid for by other consumers of the bank.

    1. Say, I don’t carry a balance. Then again, I pay back everything and don’t default.

      1. You’re UnAmerican!

    2. It’s not creating new fees, it’s shifting them from one set of consumers to another

      Yes, it’s shifting fees from the irresponsible consumers to the responsible ones.

    3. PatHMV said: “The folks who pay their bill 100% each month have been getting in some senses a free service for several years now.”

      You are missing a piece of info. The accounts that are extremely low risk of default are bundled with higher risk accounts and sold on the security market. The security would not sell for as much if not for the low risk accounts. Therefore these low risk accounts provide extremely high value to issuers. If the low risk accounts are taken out of this formula, either by voluntary separation or regulation, card companies will lose a significant income stream.

    4. I had a fixed 9.9% CapitalOne Visa card for years. They sent me a letter one day saying that they were changing it to a variable rate and a rate of 16%. I told them to pound sand and closed tha account, which was how you refused the terms.

      I then found a new CapitalOne MC variable rate card charging 7%. It’s now less than 3% APR.

      Just the same, I’ve steadily been paying it off.

      1. Dispite whatever rules come down, competition is still the name of the game and they will do whatever they need to attract customers.

  27. “The folks who pay their bill 100% each month have been getting in some senses a free service for several years now.”

    Not entirely true. The c.c. makes 3 or 4% off the merchant fees, which are passed back to consumers. Its a hidden fee. Oh and you cash paying white knights- you pay the premium too! Suckers!

  28. I work for a large regional electronics store. Although I’m well aware of unintended consequences of most (read: all) government legislation, I have rarely experienced most of it firsthand (I’m only 23, after all). So far the worst was the sharp rise in price in DVD/VCR recorders (if they have a tuner, it has to be digital, even though most people want to use it for analog recording). They now start around $220 on a good day (instead of ~150 or less). However, we used to offer a default 60 days no interest (deferred) on our revolving credit. Thanks to CARD, we can no longer do that. So now our default rate is 18% APR from day one. Don’t we all feel protected?

  29. Fight Club was the beginning, now it’s moved out of the basement, it’s called Project Mayhem.

  30. Good Lord….there is not single thing the group of boobs running the government these days have so much as a clue about. How can such an imossibly incompetent and corrupt group of people mangaged to get such utter control over our lives!

  31. Can you say sayanora to the much heralded cashless economy?

  32. Oh I got the Citigroup letter.
    The kicker is that they wanted to charge me a fee on an account that was inactivated.

    Of course, I immediately closed the account. I’m bemused that they only inactivated it after I originally called to cancel it in December. And then decided they should charge me a fee.

    Fortunately, I still have a cash-back no-fee card from Chase, which is an infinitely better deal.

  33. My solution is to have no credit cards, only a debit card, so I don’t have to carry cash. No fees, no 20% interest, no minimum payments. My wife and I save a monthly amount for a new refrigerator and so on when the time comes, and spend only what’s in our checking account. No money, no purchase; excellent credit rating. Works beautifully!

    1. Now that’s just crazy talk!

      Actually, I haven’t bought anything on anything but a debit card in years…

      Still, I understand people get in a jam, and that’s what credit cards are for. Sometimes you have to go to the hospital unexpectedly. Sometimes relatively poor people need to pay for unexpected auto repairs. The list goes on…

      And anything that gets between poor people trying to cover things like that and all the lenders that want to compete for their business is evil.

  34. Just another Republican sop to Wall Street and Big Business, who own the Republican party part and parcel.

  35. If you’re thinking about borrowing money, then it’s time to consider getting your hands on a copy of your credit report, as well as your credit score. This is especially true if you’ve borrowed money before, and your repayment pattern has been less than timely. It’s been relatively easy to obtain a copy of your credit report, but now there are companies offering free credit scores too.

    The time has finally come to answer the long-standing question – is it possible to obtain a free credit report? Fortunately, the answer to that question is quite simple – yes. In this publication, we’re going to walk you through our experience with three companies claiming to offer free credit scores. As part of that discussion, we’ll first explain the difference between a credit score and a credit report. Then we’ll explain how you can get your free score, the application process you need to go through, and the information you can obtain along with your score. Finally, we’ll talk about offers of free scores that come with a hitch.

  36. Some students might find this as bad news since it will be difficult to apply for a student credit card but let us look at the brighter side of it. A credit card can help a student learn the true meaning of being responsible but let us not forget that many others who suffered bad credit because of incorrect credit card use.

  37. It seems to me that most of the practices banned by this law — in particular banks playing games with the date a payment was made, or changing the terms of your contract after you’ve borrowed and spent the money — are not only wrong, they should have been ruled illegal under the existing fraud statutes, state and federal both. The reason this hasn’t happened can only be that the banks have bought and paid for most judges.

    But since it hasn’t, we’re left with the choices of no remedy or this law, and I must hold my nose and support this law. There’s simply no other way to hold banks accountable when they cheat their customers (presumably because existing barriers to entering the banking business are too high, or antitrust protection too weak), and credit is something most people can’t do without.

    I hope there will be a followup bill to put a stop to the banks’ similar unfair practices regarding checking accounts — including the use of ChexSystems to freeze customers out of the entire banking system for having the nerve to resist outrageous extortion.

  38. Specializing in small and medium-sized businesses in both traditional and Internet environments, Merchant services has one of the highest merchant acceptance rates in the industry, with most applications approved within two business days.

    In addition, our technological advances have effectively harnessed and exceeded the growing demands in the processing industry?allowing us to support nearly every vertical market with increasing and profitable business solutions.

  39. Specializing in small and medium-sized businesses in both traditional and Internet environments, Merchant services has one of the highest merchant acceptance rates in the industry, with most applications approved within two business days.

    In addition, our technological advances have effectively harnessed and exceeded the growing demands in the processing industry?allowing us to support nearly every vertical market with increasing and profitable business solutions.

  40. While I am not a huge fan of over regulating an industry. I do like the consumer education elements this has on short term loan and short loans products in the marketplace.

    Consumer education is the only way to break poor consumer choices and provide enough education to stop un-wanted practices by companies.

  41. While I am not a huge fan of over regulating an industry. I do like the consumer education elements this has on short term loan products in the marketplace.

    Consumer education is the only way to break poor consumer choices and provide enough education to stop un-wanted practices by companies.

  42. This is great legislation that will improve consumer knowledge and education on
    cash advance products.

    While I do not support over-regulation, I do think this will improve the life’s of many consumers who lack the knowledge to make good credit decisions.

  43. This is great legislation that will improve consumer knowledge and education on
    cash advance products.

    While I do not support over-regulation, I do think this will improve the life’s of many consumers who lack the knowledge to make good credit decisions.

    This is good legislation for the lower fico people.

  44. I do not believe banks have ever cheated customers. We are seeing backlash over regulation to trends.

    Consumers have been using credit poorly for years and it finally has caught up with us as a society.

    From mortgages to short term payday loans – consumers have made poor decision after poor decision and placed themselves in a cycle of debt.

  45. Well banks are trying to squeeze out every penny from a given credit card. Business costs money and to get money they need to get it from the consumers.
    Banks know that consumers will eventually apply for a credit card and with the rates they now offer is outrageous.
    I am glad there is a way to pay of debts.
    Apply for a 0 apr credit card

  46. Well in my opinion i think the crisis did not come as a surprise.Credit card lenders in america do not even check credtit score. They borrow everyone any amount the customer needs.This is the same for home loans.People want nice and expensive houses but they can’t cough up the monthly bills. So banks and credit card companies are left with debts and so came the crisis.

  47. I say…just cut ’em up. If you cut up your credit cards, it reveals you’ve had a change of mind concerning your credit card debt. Certainly, only not using credit cards won’t be adequate, you’ve got to start spending less too and start to pay down your debt. Generally, it is most effective to start off by paying down on the one you pay least on, so you stay inspired to keep at it.

  48. Lowest credit card offers enough resources for you to complete payments, check payment and spending history, and check your current interest rate plz checked the link and get details.

  49. Lowest credit card offers enough resources for you to complete payments, check payment and spending history, and check your current interest rate plz checked the link and get details.

  50. Lowest credit card offers enough resources for you to complete payments, check payment and spending history, and check your current interest rate plz checked the link and get details.

  51. Keep posting stuff like this i really like it

  52. i agree with what you think you have a complete grip over the topic and that is what i like about u and i would like to appreciate for this..thanks for sharing..keep up the good work in the future as well..
    http://www.onlinecheck.com/business_loans.html Business Loans

  53. thanks for bringing it to my attention, great post..keep up the good work in the future as well..

  54. Not entirely true.
    ———-
    Thomas

  55. Dispite whatever rules come down, competition is still the name of the game and they will do whatever they need to attract customers. Business Loans

  56. Dispite whatever rules come down, competition is still the name of the game and they will do whatever they need to attract customers.

  57. Dispite whatever rules come down, competition is still the name of the game and they will do whatever they need to attract customers. Business Loans

  58. This post is awesome..i’ve been reading tons of crap posts from other blogs, but shows you have a more educated reader base.

  59. In the modern society, credit cards are very essential since most peoples spending and finances revolve around credit cards.

  60. In the modern society, credit cards are very essential since most peoples spending and finances revolve around credit cards.

  61. Download ringtones
    [url=http://www.formspring.me/samsungu]Download ringtones[/url]
    http://www.formspring.me/samsungu

  62. Thanks for sharing this post with us. It’s really an amazing post. Keep posting the good work in future too.

  63. Thanks for sharing this post with us. It’s really an amazing post. Keep posting the good work in future too.

Please to post comments

Comments are closed.