The Credit Card Act of 2009 certainly had good intentions to protect the average consumer from unfair practices that have plagued the credit card industry for years. However, it may not be all good news - especially for credit savvy consumers who have mastered the art of the credit game and learned how to use it to their financial advantage.
Although the new credit card rules are touted as a solution to ease the pains of the credit crunch and improve transparency in the industry, there still may be a substantial downside for non-delinquent cardholders who use credit cards more as a means of convenience with added benefits. According to credit card issuers and industry analysts alike, the law will unfortunately make responsible cardholders compensate for those with bad credit records. Why? In limiting the credit card companies’ ability to adjust prices to match the level of an individual’s risk, the Credit Card Act leaves them with no other option but to price offers at a flat rate that works across a wider range of consumers. If some consumers do not pay an interest rate that reflects their risk, then all cardholders, even those with clean credit records, will have to shell out more money, said Peter Garuccio of the American Bankers Association. The ABA has predicted the Credit Card Act will cost the industry substantial financial losses – as much as $10 billion in lost revenues according to a recent Wall Street Journal article. With the expected drop in revenues, banks will likely raise interest rates across the board, resurrect annual fees, and cut back on rewards programs to protect their business interests and offset the adverse financial effects of the law. Of course, it still pays to have good rather than bad credit in the greater scheme of things, but it appears consumers with good credit may be the first to feel an unwanted burden once the new rules begin to take effect this August.
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