For all you "Deadbeats" out there the "Free Ride" is over!

[Gardengal18]

http://finance.yahoo.co...=2&asset=&ccode=

by Andrew Martin
Tuesday, May 19, 2009
provided by


Credit cards have long been a very good deal for people who pay their bills on time and in full. Even as card companies imposed punitive fees and penalties on those late with their payments, the best customers racked up cash-back rewards, frequent-flier miles and other perks in recent years.
Now Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit.

Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.
"It will be a different business," said Edward L. Yingling, the chief executive of the American Bankers Association, which has been lobbying Congress for more lenient legislation on behalf of the nation's biggest banks. "Those that manage their credit well will in some degree subsidize those that have credit problems."
As they thin their ranks of risky cardholders to deal with an economic downturn, major banks including American Express, Citigroup, Bank of America and a long list of others have already begun to raise interest rates, and some have set their sights on consumers who pay their bills on time. The legislation scheduled for a Senate vote on Tuesday does not cap interest rates, so banks can continue to lift them, albeit at a slower pace and with greater disclosure.
"There will be one-size-fits-all pricing, and as a result, you'll see the industry will be more egalitarian in terms of its revenue base," said David Robertson, publisher of the Nilson Report, which tracks the credit card business.
People who routinely pay off their credit card balances have been enjoying the equivalent of a free ride, he said, because many have not had to pay an annual fee even as they collect points for air travel and other perks.
"Despite all the terrible things that have been said, you're making out like a bandit," he said. "That's a third of credit card customers, 50 million people who have gotten a great deal."
Robert Hammer, an industry consultant, said the legislation might have the broad effect of encouraging card issuers to become ever more reliant on fees from marginal customers as well as creditworthy cardholders -- "deadbeats" in industry parlance, because they generate scant fee revenue.

[Sassyclass]

Another good reason to pay off those cc's and burn them. I see more banks going out of business from this. Good customers will stop using cc's. The only customers they may have left are the ones who don't pay their bill now and they won't care. Can you say PAY IN CASH?
Oh and speaking of "deadbeats" and free rides, does this mean they will be getting rid of Congress. One can only hope.

Cat

[guest002]

I'm figuring by the end of the year, I'll have no CC debt and no CCs!

[savvy_sniper]

SO glad I am ALMOST credit card debt free. All of hubby's cards are paid off and I have less than $1,500 on two cards that will be paid off SOON. The minute any of our credit cards wants to charge a fee for the privilege to carry it, I will cancel the card. I will be answering some of their phone calls and will give them a piece of my mind. I know it won't do any good, but I will feel better.

The credit card companies charge a fee to the retailer every time a buyer uses a credit card. The credit card companies gave out credit fast and furious and now they want the responsible credit card owners to pay for their bad decisions.

The credit card companies will NOT milk me dry. CASH WILL BE KING!

I am stepping off my soapbox now.

[blitzen]

People who routinely pay off their credit card balances have been enjoying the equivalent of a free ride, he said, because many have not had to pay an annual fee even as they collect points for air travel and other perks.
"Despite all the terrible things that have been said, you're making out like a bandit," he said. "That's a third of credit card customers, 50 million people who have gotten a great deal."

The thing credit card companies seem to conveniently forget is that when a person make a purchase using a credit card, they collect fees from the merchant for every dollar swiped. Anywhere from 1% on up. The merchant gets their money after the cc company gets theirs. So I'm not feeling too sad for the credit card companies who cry because they have "deadbeats" who pay off their balance every month. They make money the moment the card is swiped!

[fixer]

So people who pay their bills on time are the problem?

[Nishu]

The thing credit card companies seem to conveniently forget is that when a person make a purchase using a credit card, they collect fees from the merchant for every dollar swiped. Anywhere from 1% on up. The merchant gets their money after the cc company gets theirs. So I'm not feeling too sad for the credit card companies who cry because they have "deadbeats" who pay off their balance every month. They make money the moment the card is swiped!

This is true. The credit card fees associated with accepting cards is typically around 5% and businesses have to incorporate those fees into the price of the product. They are forbidden by contract to charge a fee for using cards so even those who pay cash face higher costs. It's precisely why I use cash whenever possible.

To the point though- the clearinghouse companies like Mastercard and Visa are the ones who see the profit from the point of sale fees and the banks issuing the cards see the profit from the interest and billing fees.

This business is long overdue for regulation.

[Monner 1]

I know what I am going to do---------get rid of all of them except one for emergency purposes. It seems those of us that try to follow the rules end up getting penalized. I pay mine off every month and that is what I was taught to do. What about people saying if you cancel your cc then that will reflect on your credit report? If you close the accounts over a longer period of time does that reflect on your report? If anybody has the answer let us know. I have said for the last 2 years that we will all go back to cash just like it use to be. I wonder what will happen when you order something on line and not have cc. I know some sites you can order and send a check. This might open up a whole new complication. Just some food for thought.

Monner

[Gardengal18]

So people who pay their bills on time are the problem?

These days it seems that people who act responsibly period ARE the ones who are the problem. The Irresponsible ones get the "free ride" on the backs of us "responsible" people. Us responsible people get the honor of paying for them, be it their car loans they couldn't pay to begin with, their mortgages they couldn't afford to begin with, their credit cards... Get used to it, there's a lot more of this wacky mindset to come...

[Greebo]

The thing credit card companies seem to conveniently forget is that when a person make a purchase using a credit card, they collect fees from the merchant for every dollar swiped.

No, the credit card companies only get the 1% on up provided the card swiper actually pays their bill.

They don't make any money if they don't get paid.

[Greebo]

So people who pay their bills on time are the problem?

From the credit card company perspective, yes.

If you pay your bills on time, and by that I mean pay off your card in full, you accumulate no interest charges, and the CC's only make the merchant fee, which isn't even enough to cover the cost of their operations, let alone make a profit.

The amount Citibank, for example, spends on marketing alone is staggering. I consulted for their marketing dept a few years back to help develop a tracking application for all their marketing programs.

[fixer]

From the credit card company perspective, yes.

If you pay your bills on time, and by that I mean pay off your card in full, you accumulate no interest charges, and the CC's only make the merchant fee, which isn't even enough to cover the cost of their operations, let alone make a profit.

The amount Citibank, for example, spends on marketing alone is staggering. I consulted for their marketing dept a few years back to help develop a tracking application for all their marketing programs.

If I am the problem, why is my line of credit raised. I got a notice yesterday. It was the third this year. Mine is being raised while those who carry balances are being lowered.

[Jayne]

Time to got that snowball a rollin....

[imagine]

If I am the problem, why is my line of credit raised. I got a notice yesterday. It was the third this year. Mine is being raised while those who carry balances are being lowered.

My guess is because they are hoping that if they give you a opportunity to spend a big chuck of change at once that you will carry a balance and then you will get to pay them interest. They are trying to tempt you.

Just my guess

[fixer]

They probably are trying to induce me to carry a balance. Although, I think they appreciate the balance being paid each month electronically. The size of the line of credit does not matter to us. What does, is we have never nor will we ever carry a balance.