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Thursday, May 21, 2009

New Credit Card Rules: The Personal Perspective

So what do the new credit card rules mean for me? I like to think of myself as a "good" credit cardholder. I've carried a balance once, for two months. For the last ten years, I've paid the full bill every month, with maybe two late payments due to sheer forgetfulness. Of course, "good" is in the eye of the beholder. Credit card companies call cardholders like me deadbeats, because I don't generate profits for them. Heck, with rebates and no annual fees, I'm costing Citigroup and Chase money. Who wants a customer like that?

There have been some suggestions in the news that credit card companies may nuke those cashback awards and other perks and impose more annual fees in order to recoup what they'll lose now that they'll be forced to play fair with borrowers. And if Citi does hit me with an annual fee, then I face the choice of eating that cost or cutting up my card and dinging my credit score. Ouch.

But you know, I've been having a free lunch for years. Citi has been providing me a service and losing money. Worse, I've been making money, in the form of cashback rebates, on the backs of folks carrying more debt and suffering from the very predatory, usurious practices of which I've been so critical. There's a bigger ouch.

Ezra Klein reminds us that there is no such thing as "good" and "bad" credit cardholders. Each of us is just a layoff or a car wreck or one lost envelope away from finding ourselves on the wrong end of the credit card companies' big guns. Why should I profit from folks just like me whose abuse at the hands of credit card corporations is triggered by nothing more than bad luck?

The new credit card regulations will give Citi a convenient excuse to jack up fees and cut benefits (but wait a minute: even before these new regs, was anyone getting letters from Citi et al. announcing lower rates and fees?). If Citi decides it can no longer afford to pay me for using its card, I won't like it. But I can live with it. Nobody should profit from deceptive business practices... not even me.


  1. You wrote "Ezra Klein reminds us that there is no such thing as 'good' and 'bad' credit cardholders. Each of us is just a layoff or a car wreck or one lost envelope away from finding ourselves on the wrong end of the credit card companies' big guns."

    So I have to ask: If you know that, why do you still have a credit card?

  2. Good question. As you say, every time we take use a credit card, we are taking out another loan and gambling we won't wind up in trouble before the end of the month. The scissors are inching closer....

  3. I have one "credit card," a VISA issued through the American Automobile Association (AAA). I treat it as a convenience card, using it for such things as e-commerce, motel reservations, and occasional purchases where I want some leverage in case a product turns out to be something other than advertised.

    I pay off the entire balance every month, so there are no interest charges. At present, there's no annual fee (except AAA dues, which more than pay for themselves over the course of a year in motel savings alone).

    This card does indeed offer convenience when used as I use it. Have you ever tried to get a hotel reservation or rent a car without one? It can be done, I suppose, but who wants to drive all day and then be told that she can't have a motel room because she doesn't have a "credit card"?

    The thing that rankles me most about recent practices is the short time I'm given to pay before a late fee kicks in. There's no doubt that this gradually decreasing time frame, coupled with apparently deliberate late mailing of the bill itself (in envelopes that conspicuously lack postmarks), has been engineered to trigger late fees from even the most conscientious consumers. I watch my P.O. box like an eagle to keep from having my credit score damaged because I "failed to pay on time" (meaning, I did not instantly drop everything to pay the bill the very day it arrives).

    Don't even talk to me about "electronic bill payment." I'll never do it unless the option is to freeze and starve to death slowly in the dark of night.

    Unfortunately, the private "credit-card" industry needs Big Brother's assistance in order to comply with the rules of decency and fair play. Therefore, I say, as Captain Jean-Luc Picard might direct, "Make it so, Barney."


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