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Credit Card Chaos |
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| Credit Card Chaos |
| Friday, September 11,2009 03:45 AM |
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When the 2009 CARD Act goes into effect in February, expect some big changes to your credit card bill and some possible fallout in your stock portfolio. The most sweeping regulation of the credit card business ever passed was signed into law by President Obama in May, and it will turn on its head how card companies make money off American consumers, say analysts Donald Fandetti and Keith Horowitz of Citigroup.
Credit card companies typically compete for your business by offering ultra-low "teaser" interest rates and other goodies like no charge for transferring your balance to their card. Higher interest rates follow, and if you make late payments or otherwise become a more dangerous credit risk, the issuers simply ratchet up the rate to compensate. Under the new law they won't be allowed to raise rates that way, say the analysts.
That will force card companies like Discover Financial Services and Capital One Financial, along with big banks that issue many cards like Bank of America, to pick their customers more carefully.
That, in turn, should make it more difficult for Americans to get a card in the first place because it means card companies will look for better borrowers, say Fandetti and Horowitz. Overall, they think the total amount Americans put on their cards could decline by 10% to 15%.
Read the rest at Forbes.com: http://www.forbes.com/2009/09/09/credit-card-rules-markets-equities-obama.html?feed=rss_popstories
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