Page 1 of 2 12 LastLast
Results 1 to 15 of 21

Thread: Great news! Responsible credit card users will subsidize deadbeats

  1. #1
    Elite Member witchcurlgirl's Avatar
    Join Date
    Feb 2007
    Location
    Acerbia
    Posts
    33,570

    Default Great news! Responsible credit card users will subsidize deadbeats

    Credit Card Industry Aims to Profit From Sterling Payers

    Credit cards have long been a very good deal for people who pay their bills on time and in full. Even as card companies imposed punitive fees and penalties on those late with their payments, the best customers racked up cash-back rewards, frequent-flier miles and other perks in recent years.

    Now Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit.

    Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.

    “It will be a different business,” said Edward L. Yingling, the chief executive of the American Bankers Association, which has been lobbying Congress for more lenient legislation on behalf of the nation’s biggest banks. “Those that manage their credit well will in some degree subsidize those that have credit problems.”

    As they thin their ranks of risky cardholders to deal with an economic downturn, major banks including American Express, Citigroup, Bank of America and a long list of others have already begun to raise interest rates, and some have set their sights on consumers who pay their bills on time. The legislation scheduled for a Senate vote on Tuesday does not cap interest rates, so banks can continue to lift them, albeit at a slower pace and with greater disclosure.

    “There will be one-size-fits-all pricing, and as a result, you’ll see the industry will be more egalitarian in terms of its revenue base,” said David Robertson, publisher of the Nilson Report, which tracks the credit card business.

    People who routinely pay off their credit card balances have been enjoying the equivalent of a free ride, he said, because many have not had to pay an annual fee even as they collect points for air travel and other perks.

    “Despite all the terrible things that have been said, you’re making out like a bandit,” he said. “That’s a third of credit card customers, 50 million people who have gotten a great deal.”

    Robert Hammer, an industry consultant, said the legislation might have the broad effect of encouraging card issuers to become ever more reliant on fees from marginal customers as well as creditworthy cardholders — “deadbeats” in industry parlance, because they generate scant fee revenue.

    “They aren’t charities. They have shareholders to report to,” he said, referring to banks and credit card companies. “Whatever is left in the model to work from, they will start to maneuver.”

    Banks used to give credit cards only to the best consumers and charge them a flat interest rate of about 20 percent and an annual fee. But with the relaxing of usury laws in some states, and the ready availability of credit scores in the late 1980s, banks began offering cards with a variety of different interest rates and fees, tying the pricing to the credit risk of the cardholder.

    That helped push interest rates down for many consumers, but they soared for riskier cardholders, who became a significant source of revenue for the industry. The recent economic downturn challenged that formula, and banks started dumping the riskiest customers and lowering their credit limits in earnest as the recession accelerated. Now, consumers who pay their bills off every month are issuing a rising chorus of complaints about shortened grace periods, new hidden fees and higher interest rates.

    The industry says that the proposals will force banks to issue fewer credit cards at greater cost to the current cardholders.

    Citigroup and Capital One referred comments to the A.B.A. Discover and American Express declined to comment. Bank of America intends to “provide credit to the largest number of creditworthy customers possible, while also remaining prudent in our lending practices,” said Betty Riess, a spokeswoman. Together with JPMorgan Chase, which has said the changes will force it to limit credit availability and raise fees, these banks account for 80 percent of the credit card industry.

    Banks are not required to publicly reveal how much money they make from penalty interest rates and fees, though government officials and industry consultants estimate they constitute a growing portion of revenue.

    For instance, Mr. Hammer said the amount of money generated by penalty fees like late charges and exceeding credit limits had increased by about $1 billion annually in recent years, and should top $20 billion this year.

    Regulations passed by the Federal Reserve in December to curb unexpected interest charges would cost issuers about $12 billion a year in lost fees and income, according to industry calculations. The legislation before Congress would build on the Fed rules and would further squeeze banks’ revenue when they are being hit with a high rate of credit card charge-offs. The government’s stress tests showed that the nation’s 19 biggest banks will take on $82 billion in credit card losses in the next two years.

    A 2005 report by the Government Accountability Office estimated that 70 percent of card issuers’ revenue came from interest charges, and the portion from penalty rates appeared to be growing. The remainder came from fees on cardholders as well as retailers for processing transactions. Many retailers are angry at the high fees and plan to pass them on to shoppers once the Congressional legislation takes effect.

    Consumer advocates say they have little sympathy for credit card issuers, arguing that they have made billions in recent years with unfair and sometimes deceptive practices.

    “The business model will change because the business model doesn’t work for the public,” said Gail Hillebrand, a senior lawyer at Consumers Union.

    “In order to do business under the new rules, they’ll actually have to tell you how much it’s going to cost,” she said.

    With many consumers mired in debt and angry at what they consider gouging by credit card companies, the issue of credit card reform has broad populist appeal. Members of Congress and the Obama administration have seized on the discontent to push reforms that the industry succeeded in tamping down when the economy was flying high.

    Austan Goolsbee, an economic adviser to President Obama, said that while the credit card industry had the right to make a reasonable profit as long as its contracts were in plain language and rule-breakers were held accountable, its current practices were akin to “a series of carjackings.”

    “The card industry is giving the argument that if you didn’t want to be carjacked, why weren’t you locking your doors or taking a different road?” Mr. Goolsbee said.



    http://www.nytimes.com/2009/05/19/bu...l?ref=business
    It's no longer a dog whistle, it's a fucking trombone


    All of God's children are not beautiful. Most of God's children are, in fact, barely presentable.


    If I wanted the government in my womb I'd fuck a Senator

  2. #2
    Elite Member cupcake's Avatar
    Join Date
    Jun 2007
    Location
    Tampa Bay florida
    Posts
    4,804

    Default

    Well we are one of those people.
    We pay expences through both of our businesses with AE Home Depot. Ill be darned if they are going to make me pay for others who dont pay their balances at the end of the month. Guess its time to run expences through a debit card out of checking. They will probly start charging for that too...Its lose lose
    My grace is sufficient for you, for my my strength is made perfect in weakness...I love you dad!
    Rip Mom

  3. #3
    Elite Member KandyKorn's Avatar
    Join Date
    Nov 2005
    Location
    cubicle hell
    Posts
    2,526

    Default

    It just doesn't pay to be responsible anymore. The bigger you fuck up, the better. Somebody else will pay for your fuck ups.
    I'm not quite drunk enough to really care, but is this her violation of her violation of her violation of her violation of probation or her violation of her violation of her violation of her probation????? ~MontanaMama on LL's latest arrest.

  4. #4
    Elite Member RevellingInSane's Avatar
    Join Date
    Mar 2007
    Location
    Where Being PC is understood as a fault!
    Posts
    11,592

    Default

    While some may feel this is a case of the responsible subsidizing the irresponsible, from a financial standpoint, the irresponsible party is the group of lending institutions.

    This article's tone is definitely one of being on the card company's side. What this article is failing to mention is they chose to give credit to risky borrowers in the first place. Also, to place anyone who doesn't pay off the entire balance every month in the risky category, without taking into account the economic conditions or extenuating circumstances in each case, is a deliberate attempt to shift blame to the cardholders. While there are cardholders who are irresponsible, some I believe planning to charge to the limit and then default, the bank's choice to relax the credit criteria and take the risk was theirs alone.

    Due date changes, interest rate increases without fault by the cardholder, and other shady practices have been ongoing in the credit card industry for years. Now the borderline sharking has been stopped, the complaining begins.

    This makes not only the borrowers who are able to receive cards post change more responsible, but also the institutions to audit their lending practices and cease giving credit to risky borrowers formerly seen as prime targets for late payment, high interest, and over limit fee revenue.

    Short term greed, yet again, gave way to long term losses.



  5. #5
    Elite Member dolem's Avatar
    Join Date
    Jul 2006
    Posts
    2,746

    Default

    My husband sent me this yesterday: "For those of you with discover card and auto payment from your checking account make sure you keep an extra eye on your due date. The company has gone to a 25 day billing cycle which means that not only will you end up paying the bill twice some months but your due date will be constantly changing."

    It seems like they are trying to catch anyone off guard, if they can. Even people who are responsible might accidentally mess up and end up paying high fees.

    My husband and I have recently given up using our credit card. Even though we requested a small limit ($5k) we would often charge too much just because it was easy. It's much nicer to log into our bank account and see a $0 balance rather than a rotating balance.

  6. #6
    Elite Member darksithbunny's Avatar
    Join Date
    Oct 2005
    Posts
    14,595

    Default

    If you pay off a credit card, do not cancel or close the account. It will screw with your credit rating. It will actually drop points. Crazy but true.

    Some credit card companies have so that if you pay off an account and the account just stays at 0 for 2 years, they will close it but it won't hurt your credit score.

    Just found this out the other day.

  7. #7
    Elite Member dolem's Avatar
    Join Date
    Jul 2006
    Posts
    2,746

    Default

    Yeah, we left it open, just in case.

    I don't get why you will get a better credit rating based of your credit cards being open.

  8. #8
    Elite Member crumpet's Avatar
    Join Date
    May 2006
    Location
    If I was up your ass you'd know where I am!
    Posts
    7,751

    Default

    Oh well. I just closed a bunch of store accounts that had no balances. I was tired of the revolving due dates and store cards always have high interest rates and late fees (the revolving due dates cause lots of people to slip up and be late....that's why they do it). If it screwed w/my credit then too bad. Those companies don't deserve my business.
    Only the good die young.........................
    bitches like me live forever!!!!!!!!!!!!

  9. #9
    Elite Member Sojiita's Avatar
    Join Date
    Oct 2005
    Location
    Central Duh-hio
    Posts
    22,811

    Default

    Quote Originally Posted by RevellingInSane View Post
    While some may feel this is a case of the responsible subsidizing the irresponsible, from a financial standpoint, the irresponsible party is the group of lending institutions.

    This article's tone is definitely one of being on the card company's side. What this article is failing to mention is they chose to give credit to risky borrowers in the first place. Also, to place anyone who doesn't pay off the entire balance every month in the risky category, without taking into account the economic conditions or extenuating circumstances in each case, is a deliberate attempt to shift blame to the cardholders. While there are cardholders who are irresponsible, some I believe planning to charge to the limit and then default, the bank's choice to relax the credit criteria and take the risk was theirs alone.

    Due date changes, interest rate increases without fault by the cardholder, and other shady practices have been ongoing in the credit card industry for years. Now the borderline sharking has been stopped, the complaining begins.

    This makes not only the borrowers who are able to receive cards post change more responsible, but also the institutions to audit their lending practices and cease giving credit to risky borrowers formerly seen as prime targets for late payment, high interest, and over limit fee revenue.

    Short term greed, yet again, gave way to long term losses.
    Exactly.
    Quote Originally Posted by dolem View Post
    My husband sent me this yesterday: "For those of you with discover card and auto payment from your checking account make sure you keep an extra eye on your due date. The company has gone to a 25 day billing cycle which means that not only will you end up paying the bill twice some months but your due date will be constantly changing."

    It seems like they are trying to catch anyone off guard, if they can. Even people who are responsible might accidentally mess up and end up paying high fees.

    My husband and I have recently given up using our credit card. Even though we requested a small limit ($5k) we would often charge too much just because it was easy. It's much nicer to log into our bank account and see a $0 balance rather than a rotating balance.

    I worked for Discover. They suck ass.
    Don't slap me, cause I'm not in the mood!

  10. #10
    Elite Member sparkly's Avatar
    Join Date
    Nov 2007
    Location
    Exchanging glances with the cunty bitches
    Posts
    14,422

    Default

    Credit card companies act like they're losing out when they "reward" people for paying their bills on time, and that nasty little bit "we're not charity" is extremely rude. THEY are the ones who offered those rewards to gain business, and now they're mad because they're not earning as many billions as they want to. If I had a dick, I'd tell them to suck it.
    Everyone is entitled to be stupid, but some abuse the privilege.

  11. #11
    Elite Member RevellingInSane's Avatar
    Join Date
    Mar 2007
    Location
    Where Being PC is understood as a fault!
    Posts
    11,592

    Default

    The financial institutions are finding themselves exactly where they need to be, their arms behind their backs and the cuffs tightening. Their greed almost collapsed the nation's economy. Mortgages, credit cards, car loans, they all originate from the same point.

    If you never have a credit card, your credit scores hurt, because there is no revolvingi credit history. If you have a credit card, the bank can change the terms and you either accept them, and the charges the changes create, or close the account and batter your credit score.

    The banks are now finding ways to drain everyone. Inactivity fees, low activity fees, high activity fees, etc. If they were not restrained, no one with a credit card would escape unscathed.

    They did this to themselves and the days of them running people into the ground with no discretion are over.

    Banks, karma. Karma, banks.



  12. #12
    Super Moderator Tati's Avatar
    Join Date
    Oct 2005
    Location
    Your Pocket
    Posts
    18,004

    Default

    Quote Originally Posted by darksithbunny View Post
    If you pay off a credit card, do not cancel or close the account. It will screw with your credit rating. It will actually drop points. Crazy but true.
    Quote Originally Posted by dolem View Post
    Yeah, we left it open, just in case.

    I don't get why you will get a better credit rating based of your credit cards being open.
    It's just that your credit is determined partly based on how much you have compared to how much you've used. If you have available credit of say, $15,000, and are only carrying a balance of $2000 somewhere - or $0, for that matter - that looks a lot better than carrying that $2000 balance with only $5000 of credit available to you. The former looks like a healthier debt ratio, even though the amount of debt being carried is the same.
    If you reveal your secrets to the wind you should not blame the wind for revealing them to the trees.

    - Kahlil Gibran

  13. #13
    Elite Member L1049's Avatar
    Join Date
    Jan 2008
    Location
    Chillin with my homeboy Xenu
    Posts
    2,435

    Default

    Quote Originally Posted by darksithbunny View Post
    If you pay off a credit card, do not cancel or close the account. It will screw with your credit rating. It will actually drop points. Crazy but true.

    Some credit card companies have so that if you pay off an account and the account just stays at 0 for 2 years, they will close it but it won't hurt your credit score.

    Just found this out the other day.
    My mother did something similar with her mastercard. We recently sold our house and she was going to use some of the left over money from the sale to pay off her card (but keep it...she said fuck visa though, long story) .
    The bank gave her a tip and said something along the lines of, "don't pay it all off, but pay off just enough and get the balance down enough to where monthly balance is manageable/easier to pay each month." The idea was that your credit rating will get better if you pay the balance each month rather than paying it all off at once*


    *I can't remember the exact details, but I think I got the gist of it.

    Frankly, if Visa gives a credit card to someone like my father, they deserve what they get

  14. #14
    Super Moderator Tati's Avatar
    Join Date
    Oct 2005
    Location
    Your Pocket
    Posts
    18,004

    Default

    The bank gave her a tip and said something along the lines of, "don't pay it all off, but pay off just enough and get the balance down enough to where monthly balance is manageable/easier to pay each month." The idea was that your credit rating will get better if you pay the balance each month rather than paying it all off at once*
    I don't understand how that would work in her favour. She'd continue to be charged interest on whatever she doesn't pay off. There is no way to "pay the balance" without "paying it all off" - if she leaves a balance on there, she will be charged interest on that balance, and she will not be considered to be paying off her balances in full - the banks make out nicely, but she doesn't. Mind you, I don't know about the credit rating aspect of it, but I do know she'd be paying interest on the outstanding balance, so I can't see why that would be preferable.

    I would think she should pay it all off with the extra cash, then continue to use the card and pay those new balances off in full every month.
    If you reveal your secrets to the wind you should not blame the wind for revealing them to the trees.

    - Kahlil Gibran

  15. #15
    Elite Member L1049's Avatar
    Join Date
    Jan 2008
    Location
    Chillin with my homeboy Xenu
    Posts
    2,435

    Default

    Quote Originally Posted by Tati View Post
    I don't understand how that would work in her favour. She'd continue to be charged interest on whatever she doesn't pay off. There is no way to "pay the balance" without "paying it all off" - if she leaves a balance on there, she will be charged interest on that balance, and she will not be considered to be paying off her balances in full - the banks make out nicely, but she doesn't. Mind you, I don't know about the credit rating aspect of it, but I do know she'd be paying interest on the outstanding balance, so I can't see why that would be preferable.

    I would think she should pay it all off with the extra cash, then continue to use the card and pay those new balances off in full every month.
    Like I said, I may have gotten some details wrong (me wrong? unpossible) but it was something along those lines

    I was going to ask someone at my bank, but maybe one of you can answer this for me.
    You know how a card holder can get extra credit cards for their kids/spouse/whatever right?
    If my mother (the account holder) got another card and put it under my name, would any activity under the card in my name go towards her credit, or would I be building up my own credit?

    I'm just thinking it would be an easy way to get a bit of credit. Buy something cheap, pay it off, etc.

Page 1 of 2 12 LastLast

Thread Information

Users Browsing this Thread

There are currently 1 users browsing this thread. (0 members and 1 guests)

Similar Threads

  1. Replies: 12
    Last Post: June 20th, 2007, 05:24 PM
  2. Bank issues credit card to cat
    By celeb_2006 in forum News
    Replies: 7
    Last Post: January 18th, 2007, 01:30 PM
  3. Credit card companies up the stakes
    By buttmunch in forum News
    Replies: 18
    Last Post: January 9th, 2006, 09:07 AM

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •