Once again, the banking lobbyists are coming out against the new credit card rules passed by the Senate yesterday and likely to become law next week. These are only slight modifications of the new rules set to go into effect next year, but the banks and credit card issuers are once again trotting out their threats to try to scare Congress into not passing the bill. Silly banks – your greed is showing.
The Same Old, Same Old Threats
First, they said, “Well, if you make us be responsible, we’ll just have to reduce the amount of credit available to consumers.” Here’s the funny thing about that threat: they’re already doing it. They started slashing credit limits before the new rules were announced, and continue to do so. Continuing an activity isn’t much of a threat.
New Threats against “Deadbeats”
This is a new one. The lobby group is now threatening to start charging interest from the date of purchase, in order to make money off of us “deadbeats” who pay our bills on time. I guess the 1-4% they make from merchant fees isn’t enough now that there are new rules prohibiting predatory behavior. They’re also threatening to reintroduce annual fees and reduce rewards programs.
They may be modeling their behavior on the airlines, but there’s a key difference: the airlines have a captive audience. If you need to fly somewhere, you can’t do it without getting on a plane. I don’t have to use a credit card to buy something. I can use cash, debit cards, or even checks (assuming I can find my checkbook.)
So, if they want to charge me an annual fee, I can cancel the card. If they want to charge interest from day one, I don’t have to use the card at all. If they slash rewards programs, then my motivation to use the card is pretty limited. Right now I charge most recurring bills and regular purchases to one card out of convenience and to accrue miles, but I could easily add the recurring bills to the online bill payment and use a debit card at the grocery store or gas station. It doesn’t much matter to me.
Competition Always Wins
It happened with the airlines – some airlines didn’t charged for bags and attracted more passengers. It will happen with the credit cards – at least one bank will realize they can reap all those merchant fees if they allow a grace period and don’t charge an annual fee. The deadbeats will flock there. The other banks will be jealous and decide to play nice again.
The whole situation is ironic. Greedy banks issued too much credit to unworthy customers so they could rake in interest and penalties. As a result, the banks are losing money because those bad customers couldn’t afford to pay the interest or the penalties and defaulted. Meanwhile, the government finally decided enough was enough and cracked down on the banks. Their response? Drive away the good customers. And these people are supposed to be business geniuses?
Once again, stupid banks make me stabby.
