If the banks weren’t allowed to increase interest rates on existing credit card balances, and only raise them on new charges, their business would disappear. People incur debt on their cards thinking they are going to be paying it off at 9%, and see their rates tripled when they are a day late with a payment, and they have no way to pay their balance, so they are stuck with the higher rate. A whole lot less people would accumulate debt if they knew they were going to be paying 30% or so.

So granularity my bleep.

That rortybomb post seems to want the term “charge card”. That was the original model, in the fifties; you charge it, you pay it off at the end of the month.

> Without that dynamic nature, they will have to treat the credit line as a loan for the full value of the line, just in case.

Yeah, just like people pricing mortgages price them as though they’re not going to prepay at all. Or like they’re going to prepay completely, if that’s disadvantageous to the lender. Not people who are ever going to be able to buy a mortgage bond at the price they’re coming up with, but some kind of hypothetical people doing a really crappy job of it just for fun. A 45-day notice requirement may raise rates a little bit for people who haven’t exhibited any symptoms of risk yet, but there’s enough competition in the credit card markets that none of them will be able to charge everyone as though they’re super risky borrowers of all available credit, “just in case”. Mostly it will smooth rates a bit, and improve transparency.

Finally, as regards Waldman’s analysis of interchange fees, the last figure I heard was something like $15 to $20 a year as the cost of keeping an account open, though it might be dropping with the move away from paper statements. Analyzing it in terms of “cost of capital” for a month’s free borrowing misses the point. Still, you’re going to see those rewards programs disappear, at least for infrequent users, long before zero-balancers all have to pay annual fees etc.