It's no secret that the finance industry isn't really a fan of the new credit card reform rules, aka the CARD Act. On Wednesday, the American Bankers Association (ABA) hosted a conference call with two of its execs to talk about the new legislation.
Although Kenneth Clayton, senior vice president and general counsel for ABA card policy, said the Act "represents a fundamental change in the credit card marketplace" and spoke of empowering consumers, he and his colleague, Nessa Feddis, vice president and senior counsel for regulatory compliance, also focused on a lot of potential drawbacks: Customers might see cards adding annual fees or inactivity fees. They might also see their rewards programs reduced or limitations added onto those perks.
Clayton went on to warn, "We are seeing some evidence, even good customers might pay more [in interest]." He also predicted "less access for those that have blemishes" on their credit records. To be fair, the ABA laid part of the blame for this tightening of credit at the feet of the generally crummy economy instead of solely placing blame with the CARD Act. For the many Americans who've already seen their credit limits slashed over the past few years, sometimes without provocation or explanation, the idea that the CARD Act -- which hasn't even taken effect yet -- was the reason behind this will likely ring hollow.
A recent article on TheStreet.com, a business-centric website, echoed the ABA's negative take on the Act. We've included the link because it offers a decent round-up of the major ways the CARD Act will impact consumers, but it's also rather slanted to make it sound as if those poor, poor banks are going to suffer unbearably as a result of the new law.
Here's the bottom line. Yes, credit card companies are still going to figure out how to make money, be it through adding fees, cutting rewards and so forth. They're businesses. If you don't like that idea, don't carry a balance and don't keep any credit card that implements an annual fee. Credit cards will still make money via the merchant fees a retailer has to pay them every time you swipe, but it won't be as much as if you were paying them interest every month. (If you don't like that idea, use cash.)
But credit card companies will also figure out how to make money from their customers, who are, after all, taking out what amounts to an unsecured loan every month they use their cards. While the CARD Act isn't perfect, it puts into place some necessary consumer protections and puts a stop to some practices that were blatantly unfair to consumers.
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