I'm not sure I agree that it won't reduce the amount of perks for good users - ie people who pay their balance in full every month and never carry a balance.

I'm one of those people. I would never get a card with an annual fee, and I never pay interest, so I don't really care what the interest rate is. I pay for almost everything with credit cards, usually Amex Blue Cash - for the convenience, the float (up to 45 days interest free between when I charge and when I pay my bill) and I usually end up getting ~$200 back in cash rewards every year.

I wouldn't be surprised if they start cutting rewards programs even more to make up for reduced revenue.

Banks raising rates ahead of the bill taking effect are doing it precisely because of the bill. In the past couple of months, two of my banks have raised my interest rates. I opted out of one of them with no loss of privileges and the other one I don't carry a balance on. And I have sterling credit.

@Hongfiately: That said, I do like a few things in the bill, such as curtailing predatory credit issuing practices to young people. It's way too easy to get upside down in credit card debt while you're in college. Credit should be built over time, and issuing banks should take that approach.

They need to crackdown on the credit rating agencies next. If it wasn't for their BS formulas it wouldn't be a big deal for the reader to let them close his card.

I don't see this bill affecting the good customers much. There might be a low annual fee for the better reward cards but most won't have them. People with no balance will cancel if they are going to be screwed. However I see the bad customers getting screwed with high fees/ high interest, and quite possibly losing credit all together. You will not be able to live of credit cards anymore and if you lose your job I hope you have savings. Also don't count on the low APR balance transfer cards anymore either. I think it will hurt people more than it will help. This bill is going to screw the same people that it is suppose to help.

His assertion of FALSE is just that, an assertion, and it's very likely untrue. For a customer like me, who (a) never carries a balance, (b) doesn't pay an annual fee, and (c) gets over $1000 in cash back per year, there's nothing good in this bill - it forces the banks to provide more attractive terms to some customers, and, just like squeezing a balloon, that loss in profitability is going to be felt somewhere.

@RebeccaOeneus:

Unless you can credibly claim that FICO scores aren't predictive of default, then they're far from BS.

ALWAYS NAYSAYING

YOU CREATE SOMETING LIKE INWARD SINGING (OR A CREDIT REFORM BILL)

Honestly this is a long time coming and if you can't see all these "rewards" are the bad customer funding your airline miles and cash rewards then you're blinded by greed.

I chose credit lines with the best APR, all of them had no rewards...

@NeverLetMeDown: I concur, I currently pay my bill in full each month and earn $600 cash back each year (its what my card maxes out at). If I lose my rewards or have to start paying an annual fee then I "lose"

He also says "Miles are progressively devalued anyway, so that's no great loss". It is a loss by his own admission, he just doesn't deem it a "great loss"

Throw this one out to the lawyers on this site. While the credit card companies are within their rights to change terms and conditions, including interest rates, can they change the terms and conditions, cause the card holder to stop using his card (if he doesn't agree) and cause a forfeiture of rewards already earned? It would seem like the rewards were already vested for past performance. This might be an interesting class action and I'm not at all sure that fraud comes under the arbitration clause. Not my field but just a thought.

@NeverLetMeDown: The business practices surrounding FICO scores et al. are wrong because they amount to legalized extortion. The system starts out with a large amount of non-public data which can only be accessed freely by the subject up to three times per year (one free report per agency per year). That data is then put into a proprietary formula and reduced to a single number. That single number is available to any lender who is willing to pay for it. It is also sometimes (but not always) available to the subject who also has to pay for it. The end result is a data collection and distillation process where the subject has to pay to access his or her own score (or find a financial institution willing to divulge that information for free). This score is important to the subject because it can be used for financial and employment purposes. You also end up funding sleazy "credit monitoring" agencies that offer continual access to the data like the infamous FreeCreditReport.com (which, despite the name, is anything but free).

@madanthony: i doubt it - rewards programs are paid for by interchange revenue (not "financed on the backs of all those bad customers" - sorry, chris) & designed to increase that revenue. since the advent of rewards, generally, the business of those customers lives & dies by the value of rewards. eliminating that value (real or perceived) eliminates those customers.

sure, some might choose to reduce/eliminate rewards, but there will still be healthy rewards for companies that wish to tap that marketplace. i wouldn't be surprised if a shift occurred - you might not be using amex blue this time next year; maybe you'll find a better program with a different bank.

at the very least, there's the consolation that even some debit cards carry rewards now, so i doubt cc cos. can afford to make too many adjustments to those programs.

I can't wait to finally have ABSOLUTELY no credit card debt (which will be AUG)

I hope the store charge cards stay the same though....

@Hongfiately: yes, but rates have been rising virtually across the board since last summer (despite a huge drop in interest rates in pretty much every other type of lending). there will be a temporary increase, but cc cos. will have to readjust rates once the changes take effect to capture/retain market share.

so the question is, would you rather have rate increases with or without these rules in place?

@metsarethe...: You don't think that the $600 you get in cash back every year came from somewhere, quite possibly from the "bad customers" who are actually making the credit card companies money because they do carry a balance from statement to statement and pay higher interest rates than the responsible people? You were getting something for free and now you might not get as much for free or nothing for free at all. You profited from a system that victimizes irresponsible people for their bad decisions and you're upset about loss? No sympathy for the people who have been losing all along so that you could have your rewards?

@mac-phisto: You make an interesting point. I find myself using my cc when I have cash in my pocket because I will get reward points. The points aren't worth anywhere close to the 3-4 % merchant's fee but they are something I won't get with paying in cash. I think you might be right on the rewords front.

@NeverLetMeDown: what exactly makes you think rewards are going to disappear? don't you understand the concept of points - retaining customers long-term & increasing interchange revenue? are these two things going to change? if not, why would the market?

Funny that for most of the other "myths" the author refers to specific provisions in the bill, but for the specific issue of whether good card holders will pay for the problems of other card holders the author just spews back some unrelated and seemingly random facts. Put another way, the author appears to dodge the issue by focusing on tangentally related topics. I don't see any way in which good customers will ultimately not have to pay for these proposals. It seems pretty basic that if a credit card company suddenly can't charge the defaulter the random $39 fee, it will just raise everyone's interest rate by .25%. Thats probably what I would do, and I bet there are plenty of smart people at the credit card companies thinking the same things...

The point (or my point at least) is that it's false to say that good customers are going to have to pay for bad customers. It's been the reverse: bad customers have been the fuel for the industry--and for all those perks good customers enjoy--for a while now.

I don't think you can justify perks if they're based off of exploiting the customers who carry a lot of debt, have high interest rates, have missed payments, etc. Get rid of the exploitation, *then* see what kinds of legitimate perks you can offer to top-tier customers.

So yes, the perks will go away. But no, good customers are NOT going to be footing the bill for bad customers. It's just that the free ride is over.

@mac-phisto:

Of note, the *banks* suggested that the rewards programs were financed by the "high-risk" customers first, not Chris.

He may say that the devaluation of the airline miles is no great loss, but, as discussed elsewhere, too - some of us use our cards when we wouldn't otherwise to get those rewards. I often use my card for purchases I wouldn't necessarily use the card for. But I always pay in full each month.

At the end of the day, for all the reasons discussed on other threads on the Consumerist, I find it in my best interest to have a credit card. I want one with no annual fee. No balance = no thought to the interest rate. This leaves as my only concern what my incentive to use the card is. And those miles, dagnabit, are my incentive. Even if they are devalued, even if it takes more of them...Between what I spend and my miles saved from my work travel, I can get a ticket reasonably frequently, so the loss of this program would kind of be a real loss. I suspect that I'm not alone.

As I see it the banks have, for the most part put up with the 'good' card users, in that they were never a great source of the do re mi. Indeed for the most part the credit card was designed for the poor soul who could not control his or her spending and provided an endless stream of money. Now that the real stream of money is drying up, the banks are trying to get some money from those people who pay on time, and those who pay off their balances every month. Unfortunetly these people are much more likely to just give up the credit card account. The banks should realize that the credit card, in times like these are not viable. All this will pass when the economic down turn ends, and the poor souls are again ready to bleed money into the bank's vaults.

@NeverLetMeDown: Closing an account can negatively affect one's FICO in a variety of circumstances that don't correlate to risk of default. Off the top of my head, I can think of two:

1. It reduces the total pool of credit that you available to you. Therefore your ratio of balances to available credit (your "utilization") increases. I doubt that *voluntarily* reducing one's available credit is a good indication that lending risk increases.

2. A closed account will eventually age off your credit report, thereby reducing the average age of all your accounts. Average length of credit history is a fairly important part of FICO.

Credit card companies make a large part of their profit from the fees retailers pay for each transaction.

If a bunch of credit card companies start introducing annual fees and day-one-interest, the one company that keeps their cards free and get the vast majority of the customers.

@RvLeshrac: true - it's been a common theme here lately. typical b.s. - it's just lobbyists trying to split the opposition & breed popular support for their generally unpopular platform.

if you fall into the category of "responsible", the question shouldn't be "am i going to lose my rewards?", it should be, "do i agree with these changes?" if you don't, that's fine, but don't base your decision on some trumped up idea that credit card companies are going to eliminate a multi-billion dollar segment of their business.

i do see rewards changing though. here's an interesting (well, interesting to me) product brief by a company that offers rewards programs for FIs. (pdf link) -> [www.firstdata.com]

generally, it talks about how rewards are starting to lose their viability as a retention method due to market saturation, & how teaming up with merchants to provide a mutually beneficial solution can increase their effectiveness.

I got that same letter from CapOne... My current APR is now considered a promotional rate, and as of April 2010, will increase to 21.9% from 14.99%!!!!

Right after you decline and start planning to live life without a credit card, and for security reasons only leave less than $50 in the bank account with a debit card, write a letter to President Obama, CC: to your congress people, and also CC: to Senator Chris Dodd if you don't live in CT, telling them that because the CC company jacked your rate, you will be closing the credit card account, and as a result will now stop buying anywhere near as many consumer goods as you used to, which you understand will not help the economy recover. Add to that your desire to see the bank executives rot in jail (unless, of course, you're one of those people that supports the death penalty).

Of course, you could accept the jacked rate, and just not spend any money through the card. Even if this is your choice, write the above letter, anyway.

@mac-phisto: That's a false dichotomy. We could easily have had both the new rules and no rate increases -- the law could simply have exempted currently existing credit card accounts from the new rules and applied them only to new credit cards.

I just tried to open a line with Juniper and they want 17.74% plus prime making it 20.74%. Are they out of their minds? I think I'll stick to my 7.6% AMEX thank you very much.

@Skaperen: if economic recovery is dependent upon not saving, is it really important to help it recover? Especially since the problems of it all also seem to be people with more money than we'll ever see also not saving?

If card companies start charging me interest from the moment I swipe my card, I have no problem going to cash. Cash for gas, grocery store, and I'll pay my cable and cell phone bills by check. No big inconvenience for me, but when many other people feel the same way, the credit cards will feel the pain.

Sure I may have to make some internet purchases by credit card, but you can be damn sure since I'm online anyway I will be transferring that cash into my CC account before the charge even hits. Wanna play games? I can too.

I'm going to go with whatever Clark Howard says. He likes the act, so then so do I. More on his site: [clarkhoward.com]

I'm kind of snickering with the card company's audacity at hiking rates then saying they can't reopen the account. They're shooting themselves in the foot.

I think this is going to be a real turning point. Americans should really get back to the old ways of paying with cold hard cash. It's what we do. That's not to say that we don't have credit cards, we do, and we use them too. We just pay them off every month.

Living below your means is really the best and only way to live.

This might be old news, but when Chase bought WaMu and my debt, they increased my reasonable 12.99% rate to 21.99%. I have a Capital One at 17.99% and a United Mileage Plus card I use for work at 15.99%. I have a BofA card but I don't know off the top of my head what the rate is. Probably in the same neighborhood. I have a lot of friends with much better credit than I do whose rates are not much lower.

Interest rates of 9.99 and lower are generally a thing of the past, based on my own research. Therefore, I am likely not to believe all these "better than you" posters who claim low rates on all of their cards. I call BS on you.

It'll make good users stay out of the national parks in order to avoid being shot by crazy nutjobs who ran up their credit card debt paying for concealed weapons and ammunition to use in the parks.

@cerbie: Short term profits are dependent upon not saving. Economic recovery is dependent on people cutting back unnecessary spending and rebuilding their savings.

If this act increases everyone's rates and causes people to drastically cut back their credit card use, it'll be the best thing to happen to this country in a long time.

All it will take is for one big bank to say, "Screw it, we're NOT going to jack up rates on every." They'll start rolling in customers, and the other issues will be forced to not do it as well. One bank will take a chance, and bam, problem solved.

Interesting...Capital One just lowered my rate from 24.15 to 17.95. Still high but it did go down.

@maztec:

Point of fact, handguns were illegal on the Virgina tech campus, crazy nutjob wasn't slowed down by it.

Point of fact, handguns were illegal in Columbine, didn't slow those kids down either.

A crazy nutjob can carry a gun regardless of the laws you pass unless you pass one that requires everyone to be naked.

A law against firearms does nothing but disarm the honest citizen and make them a target. The national parks law (added to the credit card act) just reestablishes that a person in a state where they issue a concealed weapons permit (which always require a background check) can continue to carry when in a national park in their legitimate carry zone. The reason for this is if you pass a background check just because you turn the corner into a national park doesn't mean that the gone you may carry just about anywhere else makes you a nutjob or a criminal.

@magnoliasouth: They pulled that "We wont repoen the account" with my wife's account. Then spent 2 years after we paid them off sending monthly offers begging her to come back.

@metsarethe...: @NeverLetMeDown: I'm all for rewarding responsibility, but I'm also for earning a honest dollar. Don't fool yourself, money doesn't grow on trees, your cash reward was bilked out of those in debt. Instead of asking yourself why you should lose your rewards, maybe you should be asking why others should be forced into high fees to prop up your rewards.

And I say all this as someone who doesn't carry a balance..

@David Schwartz: i don't believe it is. people have been complaining about rate increases for about a year - CARD was only introduced 1/22 of this year. hence, rate increases were occurring regardless of whether or not this legislation passed.

even if that weren't the case, i fail to see how your suggestion would be a viable option. how exactly do you pass sweeping reform of an industry without requiring compliance from the existing market? that would be a disaster.

Okay, as someone who will be out of graduate school 2 years after the changes, what can I expect for credit cards?

Higher interest rates - will they remain this high after all of the hikes in the next 9 months, i.e. is there any chance that after they recover from the changes they'll bring them back down?

P.S. I hate credit. This is probably why.

Some sterling points being made here. Kudos,all !

I believe that we're seeing the beginning of the end of the credit card economy.Punitive rates and outright denial of credit for the scummiest borrowers will return credit cards to their rightful place in the financial world: A short term money management tool, not a way of life. And make no mistake, this will change the CC issuers business models profoundly.With more explicit,transparent pricing,good customers will be able to shop for a better deal and the irresponsible will find it hard to get credit at any price (as it should be).The rub is going to be during the transition phase from what we have had to the new reality that awaits on the other side.The new rules are being written and both sides are figuring strategies right now.

Good customers will most likely balk at annual fees for cards that don't provide some tangible advantage for the user (Indeed, American Express uses just this model for their charge cards and has built a profitable business this way) .In fact, some credit card issuers already charge an annual fee to users that don't carry a balance,but have great credit (They are the issuers that you see on those "lowest rates in the USA " lists in Money magazine). They have the business model that lots of banks will adopt.

Bad customers...Bad news. If you don't have it in your DNA to pay your bills on time because "the man" is keeping you down,better get acquainted with cash. Now that the CC companies can't stick it to everbody else to keep you spending,they're going to crucify you on interest and then just cancel the card (again,as it should be).Also, if they get a whiff of you being overextended,they are going to cut their losses a lot earlier (no more raising the limit over the phone if you are in over your head already).

Overall,I think that this is medicine that we have needed to take for a long time.

@ageshin: "Indeed for the most part the credit card was designed for the poor soul who could not control his or her spending and provided an endless stream of money."

That's simply false. Look at who had credit cards and who didn't early in their history. Now, it may have evolved into something different, but that wasn't your claim.

@Ferris152:

Nope, no sympathy at all. Do the people making the bad decisions say "no, don't force the credit card companies to lower my rates?" Didn't think so.

@PSN: kingpsyz:

I certainly see it, and I'm totally fine with it.

@Chris Walters:

So, instead of good customers getting a "free ride" based on freely made decisions by individuals, we have the government forcing credit card companies to give bad customers a "free ride?"

No one will read this, but I'd just like to point out this in simple language.

If you "pay your bill in full each month" then really you don't need a credit card. You have in essence been "gaming" the credit card company out of your "perks" but the company hasn't made a dime off you.

So now after this (hopefully) passes you might be asked to pay a fee for something that you don't need?

/violin

@Skankingmike: I have no credit card debt, no car debt, and no mortgage debt. I don't carry credit cards, I bought my car with (saved!) cash, and I pay less than half as much for my city apartment as I would for the equivalent-sized home in the same neighborhood. If something should happen to my car and it should need to be replaced, I have full coverage insurance. I have a moderate cash cushion for emergencies, like the time the hospital surprised me on the morning of major surgery by refusing to let the procedure start unless I paid, in advance and on the spot, my entire 20% co-pay. Sure, I would be in deep if something happened that I couldn't cover, but that's true for everyone, credit cards or none.