May 19, 2009

Now this is hitting close to home - too damn close

From the New York Times:
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.
Going to have to start spending soon -- I have a couple hundred thousand points on an American Express card that I have never redeemed and that I always pay off on time. My Costco Amex (different account) gives me a couple pennies off on Gasoline and a percentage rebate check. Never redeemed the points as the stuff available in the online catalog is consumerist crap (cheap electronics, bad cruises and "designer" clothing and luggage). If these companies seriously try to do crap like this, I will go John Galt on their ass. We already switched most of our accounts from BofA to a local Credit Union and really love the incredible level of service. An example: I maintain two joint accounts for me and my Dad. His investments come into one account and I use that to pay his bills. He is 93 and his brain is starting to get really soft so he doesn't have day-to-day access to that account. I set up another one for his "walking around" money and keep a couple grand in that one for him to have a meal out or to get some cash for groceries (he has an attendant come in every day to cook and clean and drive him wherever he wants to go). A few days ago, I got one letter advising that there was a potential fraudulent use of his walking-around account and that those cards were frozen and new cards were being mailed out. The next day, I received the new cards and everything is back to normal. I have not received the month-end statements but there is about $1,500 missing from what should be the balance. The Credit Union did an incredible pro-active job looking for this and catching it and getting us reset back to normal operation as soon as possible and they promise to restore any missing funds. It will be interesting to see the contraction of big business and the expansion of the smaller, more service oriented businesses. Too big to fail? I think otherwise. And don't confiscate my benefits or I will move my business elsewhere... Hat tip to Mark J. Perry for the link. Posted by DaveH at May 19, 2009 8:30 PM