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janelle’s journal

Credit Card Legislation

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I've been waiting for a post from Vincent or Joshua or Jim on the credit card legislation, but I guess I'll go first.

A news article in the Buffalo News touched on the ups and downs of the legislation.

Bankers, apparently, are stating that they may be "forced" to initiate or raise annual user fees; take away bonuses; or otherwise develop practices that would be "damaging" to those individuals who use credit cards responsibly.

Well, bankers, I don't need your credit card. So if you plan on charging me an annual user fee or taking away my cash-back bonus, go right ahead. I have no "right" to a credit card with no annual user fee and a cash-back bonus. But I certainly have the freedom to cancel the card and rely solely on my debit card; cash; and checks (or in other words, I will return to a "pay as I go" system).

There is obviously a connection between the credit card industry and the healthcare industry given that a portion of people in significant credit card debt are paying healthcare related bills. I can imagine a scenario where the unintended consequence of a decrease in available credit is to put further and immediate pressure on our current health care system and our future approach to health care in our country.
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💬 7 comments

  1. joshua ·

    :) I'll summarize my thoughts -

    It's a good law and I'm happy that credit card companies are finally being taken to task... they have been predators for a LONG time, particularly on college students. I really do hate the credit card industry.

    But of course, just like with the repealing of breaks to the oil industry, credit card companies will answer by punishing us, the consumers, with higher out of pocket expenses. Not only that, but even people with sparkling credit will be targets for these people. They have no scruples whatsoever - in fact, they've already targeted credit cardholders in good standing by reducing credit limits with barely a comment, thus increasing their ratio and lowering credit scores. All that and you literally did nothing for the "pleasure!" Why did the credit cards do this? Because credit limits are often treated on balance sheets like any other asset or liability, and thus by doing so they have been able to make their balance sheets look healthier. Imagine if you were just about to apply for a home loan when your credit card company did that very thing. Their accounting magic renders your years of dutiful, responsible credit usage irrelevant. How is this legal in our country?

    So yeah, credit will be harder to get and it will be more expensive to use, although it remains to be seen how far it will go. I can't believe that the banks will be willing to play chicken with the consumer for too long - after all, the credit card companies have a hell of a lot more to lose.

    Personally, I think the idea of punishing consumers because the law isn't in your favor anymore is insanity - people like us are getting fed up with these idiots and consumers are already self-limiting credit usage anyway. Who loves bankers these days?

  2. janelle ·

    I dislike the use of the phrase, "consumers are being punished" which a lot of people are using. It makes responsible card holders seem like victims of the credit card system. But responsible card holders, more than anyone, probably are the most likely to be able to walk away from the credit card system for an alternative system.

    Overall, I'm really happy with the legislation too. I HATE seeing credit card companies on the campuses of universities.

    I vacillate on the regulations related to individuals between the ages of 18-21. The legislation furthers a tendency in our society to further shelter young adults in that age bracket, when they may not want it and when it may not be desireable to do so. The adolescent years are beginning to stretch into the late teens early twenties so that you're not considered a young adult until 21 or after. I think we can protect consumers as a whole without targeting this age bracket.

  3. metalpeter ·

    I can tell you about how credit cards are rip offs I have delt with them in the past. One day late and a huge fee. Here is another one Discover Card let me go over my limit by hundreds of dollars then they put what ever there percentage is on top of that, then every month you are charged that lets say $30 over the limit fee you are that much more over the limit. There was a time when I had the due date for a bill be on a Sunday or A saturday. Well guess what they are closed on that day so if it gets there Friday you are fine but saturday, sunday or monday (no mail on sunday) bang big late fee. The problem is that yes they gave out credit cards to freshmen who live at school or who comute. Yes there are a lot of people who get the credit card and only used it when they had to. But a lot of people didn't get that if you paid late once or twice in a row your Giant 0% that is all over everything in giant letters jumps to some much higher number and what that number means sometimes it was as high as 26%. Yes if you where smart you could play the credit card companies but I don't know to many Ok I know two people who did my Aunt and Uncle. They would get a credit card that gave you perks. They knew how much money they had in cash (like in a bank) and they would spend what they could on the credit card. They would then pay off the entire bill. They would then get the credit for what ever it was maybe sky miles I can't remember. When you pay off your entire bill then there is no interest. Interest doesn't start untill you have an outstanding balance. Or what about you fill out a form for a card for a free cool gift. You think you won't use it but you do, or after you fill it out you find out there is a yearlly fee, see that cool gift or team towel wasn't really free and you notice it is mostly hot girls at those stands. Well maybe this new law will make it better.

  4. joshua ·

    @janelle - responsible credit card holders ARE becoming victims of the system, just as I've described with my example with the CC companies adjusting good CC holders' limits in wanton fashion, and the resulting dosediving of their credit score. It's been happening to good people for several months now - it is NOT just bad credit people having their limits being reduced. Beyond that, I would definitely consider the CC companies' reaction to the legislation as a form of consumer punishment - higher fees, less availability, etc. merely because the government is forcing them to act ethically. As far as I'm concerned, their reaction is a scandal.

  5. janelle ·

    e:Joshuaa You're right about being victims in the since that Credit Card companies are hurting responsible people's credict scores.

    I should have said that we don't have to continue to be victims of the credit card system. We can leave that system and we have other alternatives. So why just complain about being victimized? I am prepared to pay off my credit cards and cancel them if the credit card companies attempt to play games with me.

    You're right that their response is scandalous. My FU response to them is to cease using their services.

  6. janelle ·

    Your example of CCs hurting credit scores is interesting. I see your point that CC are hurting people's credit scores, but the way the scores are measured already may reflect negatively on financially responsible people's credit scores.

    We have a so-so credit rating because we pay cash for cars; carry very little in student loans; and have had few credit cards on which we have never carried a balance. So we haven't "proven" that we can pay off debt. A person with more debt but pays it off will have a higher score than Drew and I who have made choices to avoid having debt.

  7. joshua ·

    Yeah, what I've described actually has happened to a few people I know, but what alarmed me most was an NPR story on the subject last week or the week before. They had call-ins, and we're talking about people with FICO scores above 700, who have had their limits reduced, changing their debt ratios, thus trashing their credit rating and making them ineligible to refi, for example. One lady that called said she had a score of around 800 - I have to admit, it got me scared. Those accounting tricks are playing with people's lives... I can't handle that and it's wrong. But as you've alluded to, it's far more complicated than pinning it down on one transgression.

    It is just one of several problems I have with the CC industry. Their marketing practices and interest rate gaming have been downright evil.

    We have the same FU strategy! Truth be told, I don't use credit and I like it. I feel better about paying for everything up front; I know I'm living within my means and that my lifestyle isn't some ludicrous fraud.

    I wish I carried very little in student loans. :(

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