Those who pay off credit cards monthly may pay a cost for that.

[madfloridian]

I guess it is one of the side effects of a bill which only touches the surface and actually does not put a cap on rates.

This is really not fair.

Big changes in store for credit card users

WASHINGTON (AP) — Every American with a credit card will see sweeping changes in the market, with limits on sudden hikes in interest rates that drive consumers deeper into debt. Even cardholders who pay off their balance each month may face new annual fees or lose out on lucrative rewards programs.

..."Banks, which oppose the legislation, will need to make up the cost somewhere, and cardholders who pay off their balance in full each month could see new annual fees and lucrative rewards programs canceled. Credit could become harder to come by too.

I am hearing from some teachers that their students heading off to college fear it will impact their financial plans. Not saying it is right or wrong to use credit cards for education, just saying it will impact young people greatly.

Some of the changes, including a requirement that cardholders receive 45-days notice before their rates are raised, are already on track to take effect in July 2010 under new regulations by the Federal Reserve. The legislation would put these changes into law and go farther in restricting when and how banks charge people and who could get a card.

For example, the bill would require people under 21 to prove first that they can repay the money or that a parent or guardian is willing to pay off their debt if they default.

Here is more about the pros and cons of the bill

The most important one to remember...that rates are not capped.

"-No cap on interest rates or fees. It does not put a maximum on the interest rates or fees that credit-card companies can charge consumers."

[HuckleB]

1. I doubt it.

If people have the means to pay off their credit cards monthly, they also have the means to use cash. I for one, will begin to use cash much more frequently, if credit card companies try to pull this crap. They already get 3 percent on every purchase, I believe.

[Statistical]

55. Exactly.

Nobody made the CC companies offer rewards to begin with.

Market forces did as the CC companies competed to gain the best clients.

Despite terms like deadbeats CC companies make a lot of money off people who (like me) CHARGE EVERYTHING.

I put everything for the month on a card then pay the card off. Everything except my utilities, mortgage, and car payments. Even my cable bill & insurance are paid by CC (automatically).

So my guess is between me & my wife about $24,000 per year in charges. 3% of that is $720 in merchant fees. I get about half that back in rewards. So net gain of $360 per person. Find a million people like that it is an easy $360 million in merchant fees.

Plus some % will end up racking up a bill from month to month = even more $$$.

If they:
1) get rid of grace period (i.e. charge interest from day of purchase)
2) get rid of rewards
3) add annual fees

then I will close out the account or maybe just stop using the card. The improved FICO is worth a low annual fee on my oldest and largest CC. Doing that however will make them lose $360 per month in fees.

Some banks will try others wont and people like me will move to the "smart ones". My main reward card is USAA and they were smart enough to stay away from subprime so hopefully they will be smart enough to stay away from this.

[cagesoulman]

2. Crap, I pay my balance off every month.

Credit card companies are the tools of Satan. That is the only fucking explanation.

[roguevalley]

48. leave ten dollars on it every month. I do.

[Bonn1997]

51. Why? (Is that your Doxie in your sig.? He's so cute!)

[roguevalley]

52. that's my baby, Tippy. He is my soul. :) I leave it so that I don't

show a pattern of paying off each month and they raise my interest or kick my rear end in some other bogus way. Hugs, honey.

[Bonn1997]

54. He looks really sweet. Here's a thread with my 2 rescue dogs

in case you missed it
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=105x8775522

[JitterbugPerfume]

3. I have already been informed by mail

that my rates are going up. I can not tell you how much this pisses me off . I bust my butt to keep my credit cards in good shape

[madfloridian]

5. We almost pay it all off monthly. Our rates are going up sharply.

We have perfect credit, but the rates are going up by 10 to 12 percent of higher.

[JitterbugPerfume]

15. it is really unfair

to people who try to be responsible

[SOS]

31. It's just more lies from the banks

They aren't going to do anything to people who pay off their balance every month.
It's just an ABA press release attempting to divide public opinion.

[anigbrowl]

20. That's what's now illegal under the new bill

you have to be indefault before they can raise your rates (or give you adequate notice of changes, ie greater than one cycle). I imagine they hiked a lot of people's rates because they knew this was coming.

[Oregone]

4. Simple: stop using them.

Look, the reason they allow people like me to keep using cards is because occasionally we have a rough month and because they make money off transaction fees in addition to interest.

What about people that have safety cards? Cards only used a few times a year in emergencies. You think they will discourage people like that from being customers because they don't normally carry a balance? Na, ridiculous.

[madfloridian]

6. I do most shopping online, usually minor purchases.

I like the convenience for that.

[Oregone]

10. Ya, I can understand that.

Paypal can sometimes work too though (they suck to deal with as a business).

I have to use them to avoid exchange rate penalties in different currencies. My crappy credit card company (Capital One) waives the foreign currency exchange. Since I get paid in USD, I save 1 to 2% on all money spent because of this. Otherwise, Id have to be paying an exchange company to convert currency constantly.

Thats something that screws me quite a bit if this happens. So, yeah, simply, stop using them. But sometimes it isn't so simple.

[TTUBatfan2008]

13. Get a debit card...

Works the same as cash but with the convenience of a credit card. :)

[anigbrowl]

21. Debit card. I cut up my last cc last month, debit is still fine.

If you have a checking account, you should be able to get one for free. Obviously it's not as flexible as a CC (only to the extent that you have the cash on hand) but then you don't pay interest or big annual fees.

[JitterbugPerfume]

16. My daughter has a low interest "safety card"

and because she didn't use it the company cancelled it

[sarcasmo]

25. I am curious about that because I have a Best Buy card I don't use and am waiting for them to cancel

How long did she go with out using the card before they canceled the card?

[JitterbugPerfume]

29. she had it a long time

but I am not sure how long

[Mike 03]

7. Wow, this is getting confusing. I pay off my balance every month, and I received something today

that blew my mind, that will give me a card with essentially an unlimited balance, and my minimum payment this month was zero.

But my parents do the same thing, and my mother's limit was cut, pointlessly, for no good reason

What the hell is going on??

[Sal Minella]

19. I read somewhere that limits are being lowered so that a greater proportion

is already on the card (without adding any new charges) -- if the proportion of allowable limit used is high enough, it triggers higher interest.

My daughter-in-law's limit was dropped to the amount they already had on the card, with a notice that ANY additional charge would raise the interest rate -- so if an automatic subscription or something sneaked through, BANG.

[nadinbrzezinski]

8. Hubby and I were talking about it

we are seriously considering canceling my 25 year account with Citi, after we check on the local bank where he has his card.

We use the damn thing seldomly as is and it is paid every month in full

I am willing to bet enough folks do that... they will stop.

[Mike 03]

9. Be careful. If you have a good credit record, you might want to retain the account,

in principle, but NOT use the card, rather than destroy the account, which could damage your credit record, Nadin.

Think about it.

[hobbit709]

12. When they jack up the interest and lower your limit

that also screws your credit rating so what's the difference.

[nadinbrzezinski]

18. Exactly and our rate went from a good 18, which was high already

to 28 just because they felt like it

[SmileyRose]

11. Does it stop them from jacking up the rate on existing balances?

I can't seem to find that answer anywhere

[madfloridian]

23. Apparently not if they notify you 45 days in advance.

Look at the 2nd link in my post.

[SmileyRose]

27. I saw that but it was unclear.

They mentioned rate hikes on existing balances due to past due payments and banks having to put it back where it was if payments are on time for 6 months. They mentioned no more universal default (halleluia!) - but no mention regarding existing balance rate hikes for people who aren't behind and never have been.

I'm not sure if the 45 feature is merely an expansion of the current 30 day requirement where they can screw you for any reason at any time just by telling you that you are screwn 30 days (now 45 days) in advance. Or does that mean if they want to change the terms of future purchases they have to tell you 45 days in advance - but in no way can they change rates on existing balance - barring the default rate already agreed to in the case of past due payment.

[madfloridian]

28. It is confusing.

But with no cap on rates, I am suspicious.

[northernlights]

14. nope

the minute they stop my 30-days grace and start charging me a fee is the minute I cancel the cards and go cash.

They'll just lose the 3% they used to get from the vendors.

[SoCalDem]

17. Restricting credit cards to "over-21" has NO downside

Those UNDER can probably still be piggybacked onto their parents' card, which will mean that Mom & Dad are responsible amd will see what those kids are buying:evilgrin:

and since we are among the "pay it off every month" club, and have only ONE card, I would not mind losing my "cash-back" bonus, and would not even mind a yearly fee (cards USED to have these).. A credit card is a "convenience"..not a necessity (at least it should not be)..

Too many people, for too many years, have been living on them, and masking the need for REAL WAGE GROWTH....and while these underpaid people have been drowning in debt, the CEOs of their workplaces have been wallowing in cash...

[madfloridian]

24. I agree with much of what you say.

However some kids are getting through college that way. They use them for books and such. I agree they should not be so freely given.

[billac]

22. I wanted "change", not more giveaways to those rascals.

Why is this happening? If the Democrats aren't careful, a new, improved, more acceptable "McCain" will emerge from
the other side.

[Uben]

26. They call us freeloaders.....

...because we pay off our balance every month. Quite simply, they are fucking liars! They make their money off the merchants that sell us the merchandise we buy with those cards. That's how it was set up originally. So now they want to charge me too? Watch how fast I cut that card up and write a check. If they choose to charge me for letting them make money off of the merchants, I will simply quit letting them do it. I don't fucking play games. I'm in it for me, not them.

[MercutioATC]

30. Discover just LOWERED my rate.

I didn't even ask...they just offered it.

Weird stuff.

[W_HAMILTON]

33. They raised mine.

And I've been a great customer for them through the years. I haven't checked recently, but my FICO score should still be above 800. I use my Discover card anywhere it's taken. I use it for EVERYTHING, since I don't normally carry cash with me. I was informed a few weeks ago that my interest rate would be going up. I didn't understand at the time, but now I see why. It doesn't matter to me much, since I never carry a balance. But what happens if I wanted to?

This, combined with the fact that I now can only "cash in" my rewards in increments of $50 (instead of $20) may make me change cards. I used my Visa for years, until they screwed me over on rewards. I then used MasterCard, which screwed me over somehow, too (I think they would never give me a credit limit increase). Discover has been good to me, and I've been giving them business. They've never made any interest off me, but they make plenty of money by all the merchant fees they receive from me using my card everywhere.

I figure at some point I'll call them and see if they will do something to entice me to keep using their card. If not, they get bumped off as my #1 card, and I'll start using this new Sony Visa I got.

[yewberry]

35. Did you call and ask for them to lower it?

I did, and they did. (Though I do carry a balance...which I'm making double payments on. Had to buy a new computer when my old one died right in the middle of an editing project.)

[SoCalDem]

36. ours too..and we even opted for the cash-back instead of the "low-interest"

and they have not lowered our limit either..still 17K & change..even though we rarely ever have gone over $1K

[madfloridian]

32. They changed the link to the CS Monitor article...updated link.

http://features.csmonitor.com/politics/2009/05/19/credit-card-bill-what-it-does-what-it-doesnt-do/

Confusing.

It says it "It bans arbitrary interest-rate increases"

It refers to a "Freeze on rate increases. It prohibits companies from increasing rates on a cardholder in the first year and requires promotional rates to last at least six months. Rate increases must be periodically reviewed and decreased if the cardholder pays the minimum balance on time for six months."

But still it does nothing to cap the interest...so none it seems to have an effect on the total interest rate.

"-No cap on interest rates or fees. It does not put a maximum on the interest rates or fees that credit-card companies can charge consumers."

[emsimon33]

34. This could be a great opportunity for PayPal!

I would just as soon never use a credit card again. I am disgusted by their usury and their tactics. If PayPal were smart, they would expand such that I would be able to pay more from my PayPal account. As it is now, if given the opportunity online, I pay via PayPal. In fact, I gave far more to candidates in 2008 who accepted PayPal than I did to those who didn't.

The lack of a cap on interest and the other threats that credit cards are making so that their obscene executive compensation packages and other perks continue mean that there exist an opportunity for an alternative such as PayPal. If I were PayPal, I would be dancing in the streets as I explored ways to leverage this.

[Waiting For Everyman]

37. The banks' theft being illegal once more, is called a "cost" to "make up somewhere".

I love it! :sarcasm: The incredible arrogrance. One theft is shut down, ok, let's find another one. They're like the Sopranos - only worse. And what's really repulsive is the attitude of entitlement they have about it.

No assholes, you cut YOUR COSTS (like exec bonuses and perks) to match what a legitimate profit margin would be.

I guess the finance MBAs aren't taught what that means anymore, they don't seem to get the concept.

Instead, they decide how lavish they want their lifestyles to be, and then come up with a rip-off to match THAT.

[Wednesdays]

38. K&R

:kick:

[tavalon]

39. Visa debit card

No need for a credit card.

[SmileyRose]

46. two points

Visa debit card - rarely offers the same purchasing protection as a straight Visa and it is VERY hard to get your money back into the bank in the case of fraud.

Remember, with regular Visa, your money does not leave your bank account until you choose to pay the bill. With debit visa the money is gone pretty much immediately - so a fraudster can wipe you out and you have to fight to get it back.

If going this route, set up a separate account just for the card and make sure the account DOES NOT have overdraft privileges, but will simply reject the transaction if there is no money in the account.

[tavalon]

47. I've been told I should do that and I suspect they are right.

[taught_me_patience]

40. Simple... I'll go back to paying cash. n/t

[fortyfeetunder]

42. same here.

This is like a type of abuse. But we can pay cash (a reliable method) and the CC companies will be fit to be tied...

[roody]

41. I pay mine off monthly. Bank of America just informed me

that out-of-country purchases will pay a 3% charge. That is ridiculous. I will cancel and get something without that. I almost never pay them interest. Never a yearly fee.

[dreamnightwind]

43. rental cars

The only thing I have found that keeps me owning a credit card is that many (most, I think) rental car agencies will only rent you a car if they can put it on a credit card. Most of them (IMHO, I only called a couple to check) won't accept debit cards. It has something to do with being able to charge you for theft or damages, though I don't really get it.

Anyone know more about this? I'd love to get rid of my credit card, but I sometimes need to rent a car.

[chalky]

49. I'm in a rental car right now, and used my debit card to get it.

Enterprise rentals--they take out $50.00 as a deposit (to be deducted from the final amount due.)
I also used my debit card at Avis last year. I've never had a problem using my debit card at a car rental company.

[dreamnightwind]

50. thanks

I'll check out Enterprise. They are in my area so it would work.

I'd love to let go of my B of A Visa, they aren't someone I want to do business with. Originally it was a Visa card through Working Assets, supposedly good stuff. If I remember correctly, it was swallowed at least twice by other corporations, and ended up with B of A (same account, corporate takeovers).

I read someone on here saying it can hurt your credit rating to close a credit card, but I have no idea why that would be or if it would even matter.

[ArbustoBuster]

44. The banks know they're peddling BS with this.

They used to make lots of money from their good customers. They made the conscious decision to make truckloads of money by targeting people who would carry balances and pay the minimum payment each month. Now that they need to trim back from "making truckloads of money" to "making lots of money" they're bitching about it. The banks can make reasonable profits without charging yearly fees; they make money off of merchant fees (they charge the grocery store, hardware store, gas station, etc. a percentage of each purchase you make).

They can drop dead for all I care. If they do, new companies will replace them, with new credit cards, and things will go back to the way they were a couple of decades ago.

From the New York Times:

"Just a little more than two decades ago, the credit-card business was a quiet, slightly boring industry dominated by banks looking for easy revenue. Card issuers made money by collecting annual dues and interest payments from cardholders as well as fees from merchants each time a customer used a card. Then the math whizzes arrived. They emphasized that the biggest profits didn’t come from people who always paid off their bills but rather from less-responsible clients who never paid their entire balance, and thus could be milked through silently skyrocketing interest rates, late fees and other penalties. Since 1995, the percentage of the industry’s income from cardholder fees has more than doubled to 40 percent. In 2005, as the push to sign up cardholders peaked, the industry sent out more than 10.2 billion credit-card solicitations, which would cover more than the entire world’s population. Two years later, card companies collected $40.7 billion in profits before taxes, according to R. K. Hammer, a credit-card advisory firm. Today Americans carry an average of 5.3 all-purpose cards in their wallets, and the average household has $10,679 in credit-card debt, according to the industry publication The Nilson Report."

http://www.nytimes.com/2009/05/17/magazine/17credit-t.html?_r=2&pagewanted=2&partner=rss&emc=rss

[and-justice-for-all]

45. Great, I am paying mine off and closing the accounts...ENOUGH. nt

[county worker]

53. If you can aford to pay off your balance evey month, join a credit union and use a debit card

instead of the credit card. You will not have to pay extra for anything.

[L0oniX]

56. They should call it "The Smoke and Mirrors Bill"