Opinion

Felix Salmon

More free goodies from credit card companies?

By Felix Salmon
May 20, 2009

Will the new credit-card regulations harm people who pay their balance in full every month? Quite the opposite, says Ron Lieber:

Will credit card companies kill reward programs or drastically scale most of them back? Of course not…

People who spend a ton generate fees galore from merchants, and that money helps the card company stay in business. So you may soon see card companies giving away more goodies or lowering annual fees for people who hit certain spending thresholds each year.

It’s conceivable that your habits might have to change if you have lots of different credit cards, none of which you spend a lot of money on, and all of which you pay off in full each month. But if you’re in that situation, cutting back on the number of cards you have is probably a good idea anyway. The fact is that the credit-card bill is a good thing for all consumers, not just those who run a balance.

Comments
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On the subject of credit cards… a glossy application arrived in the mail this week for something Barclays is pushing called the ‘Black Card’. It is a Visa card with a $495 annual fee (plus another $195 for additional users. Claims to be an exlusive offering. The website says the carbon infused plastic is ‘a more unique card’.

Who the heck is signing up for that annual fee?

Posted by CBam | Report as abusive
 

One thing I have not been able to find out is what effect the legislation will have on those millions of consumers who are currently suffering as the victims of unfair practices by the credit card companies. Does anyone know if the legislation will apply to current accounts, or just new accounts/charges that are made after the bill is signed into law?

Posted by Mike | Report as abusive
 

Yesterday I received an updated disclosure notice from Chase. “In order to remain profitable, my interest rate must be increased”. I didn’t get a bailout, haven’t been late, usually keep a small balance on the card. Will this be allowed under the new legislation?

Posted by Nick | Report as abusive
 

It’s funny. When I got my first credit card out of college, it was a stupendously crappy one. $500 limit, secured. Couldn’t be less prestigious. But it was a “titanium” card with a metallic finish, and the bank’s logo was screen printed across it with cheap ink. I scraped the logo off with a coin in about 10 seconds and just had a blank, gray Mastercard.

I was quite amazed at the reactions this provoked among the many people who assumed it must be something quite exclusive. It was a conversation starter and I could’ve leveraged it into a few dates, I’m sure. For certain people the $495 fee might be well worth it.

Posted by Brad | Report as abusive
 

Brad, I think you’ve hit it. The price is strictly social signalling, where the whole point of having the card is to show that you can afford to have it. It’s not different from the now-withdrawn $1000 “I Am Rich” iPhone app, or a $5000 Gucci purse, or even Eliot Spitzer’s $4300 bill for one night with a prostitute.

Posted by Ken | Report as abusive
 

And yesterday, I received a notification from Capital One that my account (held nine years with no late payments & carries a balance) would have a change to it. They said my rate would change to around 19-20% above prime, putting the total around 23-24%! That’s over a 10% hike–without any negative activity on the card. Nice way to slip it in the random percentage hike before the President’s action. Geez. Can’t win for losing.

Posted by Gretchen Denver | Report as abusive
 

all my credit cards have already hiked the fees before the selfish polititians in washington could make up their mind on how to do something too little too late once again! that is typical of our great leaders

Posted by keith | Report as abusive
 

Yes. I’m fairly sure that AmEx loses money on me. It’s a second card (my main card is a rewards card) that I charge something on every other month or so (and pay off in full). The interchange fees that AmEx gets from the merchants can’t possibly cover the marginal cost of administering my account: just sending me a statement every month must cost them on the order of $40-$50 a year.

So it wouldn’t surprise me if AmEx tries to push me out.

 

There is NO point in opening any credit card with an annual fee. Brad and Ken’s point are dead on (and hilarious). The only point in having it is to be able to whip it out in front of people in the hopes they will think you are a baller.

The metallic shine wore off?!?! $495/year for some lamination doesn’t sound like a good deal to me!

 

today RBS sent a letter to me raising my interest rate on the Master Card to 19%, I had paid off the balance and used the card when the rates were very low to pay off Dental bills that were very high. I closed my account right after I told them that I have had the card since 2001 and am now being penalized because I paid off the balance. They (and I am sure all the others will follow suit),are using not the US APR now but the Global one from London.

Now for the real damage they are inflicting. The small business owners who for one thing participate in trade shows and put $3,300 on a card for a show. Now they will be hit with an additional 19% or more when they are watching every dollar they spend. Is this what our President has done..and I supported him.
Heather

Posted by Heather | Report as abusive
 

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