Realizing they can no longer gouge slow payers with rapid interest rate hikes and questionable fee practices once the new Federal Reserve rules take effect, possibly even sooner if the credit card reform bill passes Congress, credit card companies are looking to make up for their profit shortfall by changing the rules for good payers.

Some in the credit card industry think good payers have been getting a free ride. They pay no interest as long as they pay their credit cards in full plus get cash back rewards, frequent-flier miles and other perks. In the industry these good payers used to be known as "deadbeats" because the credit card companies didn't make much profit off them. It was the late payers who paid onerous interest rates and penalty fees that made the profit for credit card companies.

In fact a 2005 Government Accountability Office report estimated that 70% of card issuers' revenue came from interest charges and that the portion from penalty rates and fees appeared to be growing. The rest of the profits came from fees on cardholders and retailers for processing transactions. Retailers have started to protest the higher fees expected if Congress passes the credit card reform bill and pledge to pass them on to consumers.
So in the end those who use credit cards, even if they pay them off in full each month, will likely pay a larger share of the profits the banks say they need to make in order to offer credit cards. Expect to see a reinstatement of annual fees and higher interest rates even if you pay in full each month. Also expect to lose programs for frequent flier points, cash back and other perks you've had in the past.

David Robertson, publisher of the Nilson Report, told The New York Times that people who routinely pay off their cards are "making out like a bandit. That's a third of credit card customers, 50 million people who have gotten a great deal."

The credit card industry used to give everyone the same deal in the 1980's, with interest rates for everyone at about 20% and annual fees. The relaxation of usury laws in certain states changed the entire pricing for the industry. Since it could charge higher interest rates for riskier credit card users, it developed deals for people who paid regularly on time with lower interest rates, 0% balance transfers, cash back and other rewards, and the list gets longer as the industry got its profits from the late payers.

Now that the tables have turned and late payers will no longer foot the entire bill, good payers will be the next best target for the credit card companies to continue to bring in the profits. Robert Hammer, an industry consultant, estimates that the money generated by penalty fees like late charges and exceeding credit limit fees increased by about $1 billion annually in recent years and is expect to top $20 billion this year. With some of that revenue expected to be lost with the new bill, there will be a shortfall.

At the same time, when the stress tests were run by the Federal Reserve, the estimate was that the 19 largest banks would see about $82 billion in credit card losses over the next two years. The upshot: expect to foot the bill for the rising loses and new regulations, even if you pay on time.

Lita Epstein has written 25 books including "The Complete Idiot's Guide to Improving Your Credit Score."

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