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New credit card rules: Blessing or curse?

December 19, 2008 by  

New rules for the credit card industryThis week, the Federal Reserve approved new regulations for the credit card industry which are aimed at protecting consumers.

The rules, which are set to go into effect in mid-2010, prohibit credit card providers from engaging in practices such as applying all of a cardholder’s payment to the balance with the lowest interest rate.

They also insist that issuers give customers 45 days’ notice before changing the terms of their credit card agreement, among other limits on industry behavior.

However, although consumers may cheer the new regulations, some industry experts fear they will actually have a negative effect on the economy.

Banking analyst Meredith Whitney raised concerns that the move will inhibit consumer spending, reduce the ability of lenders to offer credit and cause them to tighten their lending criteria, according to Reuters.

"This [credit] line reduction will strain credit quality not just for credit card loans but for all consumer loans," she said.

Whitney added that many credit card companies have already been forced to lower credit limits and cancel customers’ accounts, in order to protect themselves from risk.
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  • http://stanfordlocke.com Stanford Locke

    Credit MUST be tightened.
    Yes, it will tighten borrowing, thus “spending”.
    It is the last decade’s loose credit that fomented out of control impulse “spending”.
    Why do I put quotes around the word ‘spending’ above?
    Because people are “spending” money they do not have due to ignorant use of credit.
    We have built up a false economy that is now bearing the fruit of the use of false money…
    Low savings, low investments, high interest = less real money going to goods and services…more going to pay interest on ill thought out borrowing.
    “home economics” should be taught in schools from kindergarten through graduate and post graduate levels STRESSING real economics = effects of and costs of interest, disposable income, investment/savings/retirement PLANNING and execution.
    MORE needs to be done, but this is a good start!

  • http://EdJones.icanvoice.com Ed Jones

    Couldn’t have said iy better, especially about teaching the concepts and idea’s that of:
    “”home economics” should be taught in schools from kindergarten through graduate and post graduate levels STRESSING real economics = effects of and costs of interest, disposable income, investment/savings/retirement PLANNING and execution.
    MORE needs to be done, but this is a good start!””

    [Reply]

  • Ken Roberts

    all of America needs to bite the bullet and run their homes and lives as a business and do not spend more then they make it is a curse to have good credit but not to have the wherewithal to pay it back. The house should also exhibit some more restraint on spending tax dollars not collected yet .

  • Ralph Zecco

    I don’t care about the lenders supposed problems. They have shot the interest rates up into loan shark depths. 25% is normal if you have normal credit but if you decide to close the account to pay it off and you notify them, they increase the credit rate to 29-32%.

    How much does the money cost them? less then a half percent from the treasurery or at the most less then 4%.

    As soon as I can, I’m getting rid of my cards and cutting up the ones being paid off. So my use of them will go down and they can kiss where the sun don’t shine if they ever want me to get another one.

  • http://MSNExplorer Gordon G. Hamilton

    Well,

    I see the US becoming more dependant on credit and falling into a vast abiss. We suffer so greatly now from over extended credit that our country is about to go bankrupt. The real need is to force these money grabbing greed infested banks and mega companies as well as the slot machine mentality of Wall Street to face the music. Kill all credit cards, tighten all loan criteria to include limiting how much one can be indebt, (say: 35% of their net income before borrowing more) and make every one suffer through it till they learn to live within their means. The entitled mentality of our citizens, ie”I know what I want and I want it NOW!” attitude,are playing into the hands of the redistribution of wealth crowd and they will have all of us in the same boat as we were before we came to America and started over. The haves and the have nots.

    If a family has a $20,000 credit card debt and owes thousands more on vehicles, homes, toys, and vacation property, yet has no where near the income to support it then looses one of the two jobs they hold, they go down with the rest of the stupid people. Then our government bails them out again and again. NO WAY!

    Turn it off! Stop the bleeding! Force people to come to grips with their greed and selfishness and want before need attitude. That family I just spoke of goes to a credit counciler and is told, cut up the credit cards, never spend more than you have in the bank, save some for a rainy day, invest in your future, don’t depend on your neighbors or the governement to bail your selfish ass out, pay off one loan before you borrow more.

    Sooner or later, probably later, the American people will wake up and there will be nothing left. If the big three, the mega .com’s, the greedy insurance companies, the mega hospitals and the Wall Street money machine don’t have all this credit to rely on they will have to adjust their stratagy to servive or go under.

    We need more conservitive business planning not more credit!

    Pass more laws against the money grab and they will either change or die.

    Gordy

  • Pat Mencke

    I worked at a bank for six years ending over 40 years ago. They were corrupt, unpatriotic, sexist, organizations then using predatory tactics on both clients and employees, motivated only by greed. I have not patronized a bank since then. With the advent of debit cards and PayPal and other such private and free services, I can’t see that banks have any reason to be. And now their true character is laid bear for anyone to see. Take a real close look and support credit unions and let the banks go bankrupt.

  • Daryl Pullen

    Let’s see, they get their money at say 5% which is high, they charged me a 30% rate for being a couple of days late over 1 yr. on about $10,000 that I owed. 30% compounded over 3 years is equal to almost a %100 percent on their money if I paid no principal (rule of 72). And even at that they lose money…what a bunch of criminal nincompoops.
    With the ok of Congress the credit card companies have bled the American people.
    Nothing has changed with the new credit card rules…they still have the right to charge what they damn well feel like…they consider the American people idiots.

  • Britt Jackson

    Wait a minute everybody!!!! The Federal Reserve is a private corporation having absolutely no governmental authority whatsover that has been stealing money from the American people for close to a hundred years. And you folks are not standing up and questioning the fact that they are now making the rules for credit cards. Wake up people! Fool me once…….

  • Karen

    One of my credit card banks just canceled my card without any advanced notice. I only charged small amounts on the card, and I always paid the total off every month. I was never a “credit risk.” I have excellent credit. The “problem” for the bank was that they never made money off of me, because I never paid any interest. They only want customers who charge the cards up and pay them interest every month.

  • Gordon G. Hamilton

    Hey!

    The FEDERAL RESERVE may be a private bank but it dances to the Governmental tune played by the crooks you people elect into office. Remember, their goal is to redistribute the wealth to the arrogant wealthy. Redistribution of wealth is the first priority of communnisium/socialisum. Take a look at any communist country, you find the government and it’s banks first gain control of all the wealth, then they begin changing the law of the land, in our case the Constitution. Get rid of Guns so the masses can not protect themselves from the take over, kill free speach so the masses can not exchange ideas, abolish protections against illegal search and seasure, then the way is clear for full absolute power. Control the money, defenses, and legal protections against the government and they then make the people beholding to them. No more government of the people, by the people for the people.

    Remember, “Trade your freedom for security, you have neither”, Thomas Jefferson

    Gordy

    • Britt Jackson

      Thank you very much Gordy. I am Canadian and I seemed to be more concerned than most of you good folks in the U.S.A. Keep up the good work!

      Britt

      • Jeane Jaime

        Britt Jackson
        What kind of problems regarding credit cards do you have in Canada??
        Have you heard about the North American Union whereby Canada, USA & Mexico would become one country under one control?
        Respond please
        Jeane Jaime
        bobcjj@cox.net

        • Britt Jackson

          Jeane we have similar problems in Canada with credit cards however I believe you should look carefully into the legality and legitamacy of your Federal Reserve and why it has systematically destroyed the American dollar. This will lead you into the NAU (North American Union) and why the elite want one world government. You may want to start with “Freedom to Fascism”, a documentary that you can watch online.
          Britt

    • David Wilton

      Our goverment at all levels is so corrupt and the silent majority is so wrapped up in their personal pleasures they don’t have a clue of what is happening. The Constitution should read “A government of big business, by big business, for big business.”

  • Dr. J

    Credit Card companies are crooks. When you default on a card, fees and over limit fees continue to accumulate, so that when they give you a 50% reduction in payment settlement, it comes out to the original amount you owed. They then sell these bad loans to debt collectors who buy them at 50% off original price. The credit card company or bank then writes them off for tax deductions. So these crooks are not loosing anything! They don’t need bailouts, they need bankruptucy. The banks have mountains of money, but won’t lend any. Have you tried to buy a car lately? You won’t unless you have thousands to put down. The average American’s saving is only $1000. By, the way this entire economic downturn was triggered by oil prices. As oil prices went up, so did inflation, interests rates, mortgages and then bank mortgage instuments failed. Blame the Democratic congress for not wanting to drill !

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