"They're basically ways banks trick customers into using their cards, hoping they'll be slow with paying off the balances and rack up interest charges that dwarf what customers reap in rewards."

TRICK? TRICK? Wow, that's insulting. Thank you so much for pulling the wool away from my ignorant eyes, and helping me to know that the banks are "trick[ing]" me.

The banks offered me a service. I took it. No tricking involved, just two parties freely reaching an agreement. Frankly, I resent the implication that everyone who uses a rewards card is some sort of sucker.

In fact, paying for everything possible with a cash back credit card is incredibly fiscally responsible. I get penny-by-penny expenditure tracking and save 2% on everything I buy.

Isn't this what people have been saying in the comments since this bill was announced? Way to be on top of things Morgan Lewis.

Way to go Captain Obvious...Another "expert" states what the rest of us already know.

I'm going to eat the Octopus and throw the credit card in a wood chipper.

Do away with my rewards and I'll stop using your card. Simple as that. You already make 3% or so from each purchase due to merchant fees, deal with it.

That so-called "study" is nothing but a scare tactic designed to get the well-heeled folks with good credit to be against the reform. Companies like Am-Ex make their money on the fees collected from retailers at the time of purchase. It is in their interest to have folks charge as much as they can on cards. For those who charge significantly and pay the balance every month--the true the beneficiaries of the rewards, they will always have products that serve the niche.

@NeverLetMeDown: Sorry you don't like the word TRICK.

Now to the heart of what he was saying.....They are used as a kind of loss leader, because yes some people who take them up on the offer do end up paying interest and rewards. Enough to be profitable or they wouldn't do it. So he is saying they will keep on doing it.

@goodcow: I'll still continue using the cards because of other benefits, but i'll be waving them good bye the moment they start charging annual fees.

How about a law where we just get rid of credit cards?

Perhaps they think we've been adequately hooked, and that if they take away the rewards and promotions we'll just keep using the cards anyway. I suspect that's what I'll do. :-) [of course I've never been one collecting 'rewards'.]

@twophrasebark:

And electrical power, and cars, and all other highly useful things which can be dangerous.

@jbl-az:

I just don't understand people sneering at "rewards." Fine by me, if you want to pay 100% when I pay 98%, your call.

@MostlyHarmless: I thought that Visa, Mastercard, etc made the money from transaction fees. The banks are the ones who make money from interest and offer the rewards.

Is this incorrect?

@Prole: Seeing all these stats on how many people carry balances and such, I would assume that the credit card companies make a killing from interest too. But yes, the merchant fees do help when a customer is not carrying a balance.

Banks make money from interest and by charging a gazzilion other fees.

@NeverLetMeDown: Bascially you have to geek out with finances and rewards to use them responsibly and then make sure you pay your bill -in full- each month even if they move the due date etc...

@twophrasebark: I sort of agree. CC are useful, but think of the immeasurable damage they cause to irresponsible people. Lending money to fools is never a good idea, and (as we all know) credit card companies *target* the financially irresponsible because they're a potential source of income.

I realize the new legislation curtails this just a bit (college students, etc). But IMO debt is generally a bad thing and the average financial fool should have a harder time getting neck-deep in it than it is currently.

DEBIT cards are also convenient, and can be used just like a CC. But there's no risk of going into debt. Some of them even offer similar rewards (my bank's does).

I think I agree with you even if your statement was made in jest :)

I wouldn't worry about it. In the short term they may cut things back, but a year down the road competition will set in again and the deals will return.

RE: Tricking customers into using their cards...

On my BoA card, I opted out of an interest rate increase, so I can continue to pay down the balance at the old rate. This means I have to stop using the card. So what does BoA do? At least twice a week I get solicitation calls from them trying to sell me some dumb-ass credit protection plan which, if I am stupid enough to sign up, will count as use on the card and will cause my interest rate to go up to 28% retroactively.

Bastards.

@econobiker:

Don't know what's so geeky about getting cash transferred into my account a couple of times a year.

Of course, all this only applies if you're paying your bill in full, but that's not an issue relevant to rewards, that's true for any credit card (or loan with less than optimal terms).

And credit card companies are going to get rid of the grace period too. What other threats can they pull out of their arse?

The liberal bias on this site is killing me. It should really be more impartial and non-partisan...much like Consumer Reports is.

Although conventional wisdom and, hell, a Harvard study on the credit card reform to be brought about in the CARD act says the changes will help out Joe MasterCard...

They're basically ways banks trick customers into using their cards, hoping they'll be slow with paying off the balances and rack up interest charges that dwarf what customers reap in rewards.

Who's CW said that? The Obama Administration?

I think conventional wisdom would tell you that when government regulates and creates more red tape and higher costs of doing business, those costs get passed on to the consumers.

Whether it be a gas tax or SarBox, someone has to pay for it. Again, it's more subsidization of the irresponsible.

Personal responsibility please. Fewer quips with a left bent, too, please.

@michaelgibbons:

/edit Whose.

@NeverLetMeDown: I don't think the article was meant as a personal insult to you. Calm down.

The problem is that we're not all as responsible as you, and these 'rewards' bonuses are, like it or not, a means of trying to get you further in debt to whatever card company you're with.

@GuinevereRucker: Credit cards don't loan any money to anyone.

It's the banks backing that is the source of the credit.

Visa and MC are essentially vehicles, while COF and AMX have finance arms.

The attack on credit is funny, because instead of attacking the irresponsible ones it quickly turned into a blame the evil, giant corporations.

Just as someone else mentioned, a lot of things in the world are dangerous with or without this magical regulation. Personal responsibility trumps all.

10+ years ago, you did have to offer up something to get them to use their cards. Now, as portrayed in the Visa commercial, the work runs so smoothly using plastic, that everything falls apart when some idiot pulls out a greenback or God forbid - a check.

The fallacy is that this "smoothly running machine" has been hurting the consumers with this false perception that credit is the best way to make every purchase. It used to be that credit was only for large purchases, not for your daily pack of gum.

Argh! What has RyanAir done? The airlines charging for toilets thing seems to have become an established fact...

@azntg: If you purchase a house the interest begins accruing on day one, why shouldn't a credit card?

@NeverLetMeDown: How about "betting" that customers use them irresponsibly. Odds are, a certain percent of us will encounter a perfect storm of medical debt, lost jobs, divorce, etc etc. Now how do we feel about maximizing our rewards (at the expense of the less fortunate)?

@NeverLetMeDown: Also, with their virtually carte-blanche ability to change the Terms and Conditions at any time, the agreement one may have made at the initial transaction (purchase) may differ substantially from that agreement down the road.

For those who have large balances, they either have to accept the terms, or close the account... neither ideal solutions.

@HRHKingFridayXX: Let's do away with casinos, fantasy football leagues, and department stores that give out coupons, too.

I mean, all of those are hoping you'll spend more than you probably should, right?

I think Obama should create a Macy's bill and tell them that their one-day sales can't be too enticing.

Give me a break.

@NeverLetMeDown: Sorry, but that's exactly what it is. A trick. There's no other way to describe needing 34,000 Amex Rewards Points to get a freakin' toaster from their catalog of crap you are authorized to choose from, only to find out you have to pay $50 in shipping to get it.

A "service"? I have to laugh.

@HRHKingFridayXX: Sorry, I'm not convinced. I realize my rewards are being paid by the less ________ (insert word here, though I would not choose "fortunate") and I have no problem with that.

Just as I have no problem buying a camera with a $50 rebate knowing that the only reason the rebate is being offered is because ~80% wont submit. That's not my problem.

If you can't maximize your personal benefit by using a credit card, don't use them. But the pendulum on legislation (which arguably there has not been enough) doesn't need to swing too far in the opposite direction.

@econobiker: "geek out with finances"? not really. every 6 months i call Citibank and request any cash that i've earned. in the meantime it's a lot easier for me to keep track of my spending when it's itemized for me every month on my CC bill. it really all comes down to whether or not the person spends more than they can afford. it's as simple as that

@MaelstromRider: i think i would file that under tricking. this whole credit protection is ridiculous to begin with.

Credit card issuers have a multitude of options when it comes to generating profitability. CARD turned off what were considered "abusive" practices and now CC issuers will use more transparent mechanisms to generate profit. Fees for transactions and card ownership are expected consequences of the act. Low or no balance customers will now contribute to the bottom line whereas previously they enjoyed essentially free services due to the cash generated by balance-carrying borrowers.

@michaelgibbons: it's amazing to me that people don't realize more regulation=more costs associated with that regulation, and those costs are passed on to the customer. sometimes the regulations are worth it, but often not so much. the bottom line is CC companies for the most part have not done anything wrong, so why should we, the customer, pay to regulate them?

@NeverLetMeDown: I took an electrical wiring class and HOLY GOD I can't believe we have that stuff in our houses. It is just WAITING to kill you.

Credit cards are far less frightening. :)

@ckaught78: They make a few points by each transaction to pay for the float for the month. So we really pay it in the price of the goods, even those who don't use credit because of course all prices reflect the fees.

I wouldn't use the card if they started charging fees from day one and the banks would rather I use the card, so they will not ask me too. It would change the way cards are used in the country and they do not want to do that. So yeah they COULD do it, but they haven't and won't do it because it won't work for them either.

@craptastico: "the bottom line is CC companies for the most part have not done anything wrong"

wait.... what? Are you serious?

@econobiker: How is it geeking out? I found the best reward card for me, I pay my bill monthly, now and then I redeem my rewards (cash back). It's no more work than paying the water bill.

I know some people swap around among cards for different rewards, but really an extra 1.2% of a $15 transaction isn't worth that to me; my time is worth more.

@twophrasebark:

Credit cards are incredibly useful. They are also very damaging to one's financial well-being if used improperly. Making them illegal might help the customers who are badly hurt by their use, but generally they are great products for consumers who want to manage cashflow and obtain short-term financing.

@BZMedia: i'm 100% serious. they're providing unsecured credit, which is the riskiest for the lender, so it should come at higher rates. If you stop paying your credit card bills there's nothing they can really do other than charge you penalties and hurt your FICO. If a bank agrees to give you a $5k credit line, and then you go out and get another $50k in credit lines from other banks, than why wouldn't the first either raise your rate, or lower you limit? Bottom line is it's the customers choice to borrow, and if they want to borrow at horrible rates, like 19.99%, than it's their decision, you can't blame the lender

@enm4r: Well lets just hope you never find yourself encountering anything like a medical debt or lost job. All I'm saying is that the price of possibly being very very screwed isn't worth the cost of some cash back or useless frequent flyer miles.

@craptastico: "and if they want to borrow at horrible rates, like 19.99%, than it's their decision, you can't blame the lender"

Soooo..... when BOA took my rate from 5.9% to 31.99% (permanently) for being 2 days late with a single payment during a 10 year history, that's acceptable? Or Amex cutting my limit by $10k with no warning whatsoever, (with no late payments in a 6 year history) and jacking my rate to 26.9%, that's acceptable? The other cards I had with completely different banks raising my rates to 25.9% based on the actions of the other two cards, and no other reason, is acceptable?

Reinstating accounts that have been closed in order to charge an annual fee, 2 or 3 times over, charging interest on it, and not sending out a statement because the account was closed, is perfectly fine.
Shifting due dates and double-cycle billing is fine.
Sitting on payments until after the due date to impose a late fee is fine.
Shredding payments to impose a late fee is fine.
Hawking credit to high school & college kids, with NO JOBS, in return for a free hat, is fine.
Sending out credit apps to recently bankrupted people is fine.
Doing absolutely nothing for the customers that call in advance of a foreseeable problem making payments, is totally fine.
Putting the terms of the accounts into a microscopic 10 page book that even lawyers have difficulty understanding, is completely fine.

All of this is the end-user's decision, right?

Sorry, but the CC companies have done PLENTY wrong.

@BZMedia: Was it BofA's fault you were 2 days late with a payment?

Maybe not the best business practice, but rules are rules.

And in your agreement, did it say your APR and amortization schedule could not be adjusted?

@michaelgibbons: I think 31.99% is criminal for any reason. And I couldn't understand my "agreement" any more than I can understand Japanese.

But you're right, rules are rules. And the rules say that entire balance is unsecured. So 31.99% doesn't mean much on something you can't ever collect. May as well be 99.99% for all I care.

Fianlly a new credit card photo and nobody says anything?

@michaelgibbons: "Whose CW said that?"

Yeah, I think they've been reading their comment sections a bit too much around here - funny, most people I've had discussions with on this (outside of Consumerist comment sections) thought it was a bad idea to begin with.

But around here, if you mention an idea like that, the usual suspects just start covering their ears and babbling about trolls and EVVVVIIILLL credit card companies and how government is our savior and the solution to everything.

There's a good way around this. Don't use credit cards! Debt it dumb, cash is king, and long live Dave Ramsey.

@Joshua Willis:

You got it, Willis! It's not like that 2-5% cash back is really worth the risk. The sale of your personal information, the abuse the CSR's will put you through when they do have an error. I hope the CC companies go out of business when they start removing the benifeits like cash back and sky miles. As for me, debt free and loving it!