@SmaShT: The problem with debit cards, is that if there are problems, they are with your money, rather than the banks/CC company's. It makes it harder to get your money back. An example of this happening with an online purchase:
[consumerist.com]

and another example where a debit card was charged months later due to a 'glitch':
[consumerist.com]

@pecan 3.14159265: I don't see the big issue for using a debit card online. I've been using it for years with zero issues. You are still protected against all fraudulent charges, and if that isn't enough for you, there are systems like the one used by BofA where you create a single-use number for online purchases. I'm sure other banks have a similar system in place as well.

But I still stand by my original premise. See we have forgotten who we are, that is the collective we not the consumerist we, Consumerist readers are pretty savvy folks its the other folks out there that have lost sight of the way this works.

We the consumer are the ultimate owners of the power, yet we (the collective we :) ) fail to exercise it on a regular basis. If we simply walk away from a company en mass then the consumer credit side of that company ceases to exist.

We tolerate poor service, rough handling, shoddy workmanship etc etc because we feel we have no option. Yet if enough people vote with their wallet then the greedy bastards sit up and take notice and try to figure out how to separate use from our money again and eventually they have to succumb to our demands or wink out into oblivion. It just has to get to the point where we as a collective raise our hands and our voices and say enough is enough we are through letting you beat the money out of us.

Great, another edition of irresponsible Americans ruining it for all of us.

I still have checks, but I only use them for bills that it's easier to pay by mail. Some companies have shitty websites. Or I'd rather pay my utility bill by driving by and dropping a check in the box.

I have Batman checks. They rock. :)

Nope nope nope. Your rewards are taken directly out of merchants' pockets and from the outrageous fees the suckers or unfortunate wind up paying.

@babyruthless: The merchant fees are incorporated in the products or services you procure with your credit card. You do pay them, they're just not a line-item on your bill.
And with the rules proposed in the article, you would then be paying directly because you would now be charged interest from the date of purchase, with no grace period.

@Rey: not sure what you're talking about; never voted Republican in my life.

@HiPwr: No parallel, at all. Entirely different business models.

@captadam: credit cards are insurance? I don't think so.
The difference is that you know what you are participating in when you buy insurance. And, the insured parties that have the highest risk pay the highest rates to get insured. No comparative value to the situation at hand with the credit card companies.

Regarding the issue of private enterprise; tendencies are tendencies, whether based in political or commercial terms. In this case, it seems like social engineering to me to have the people who manage their finances well pay the costs of carrying those people who do not manage their finances well. In fact, I don't need a credit card at all. I use my one card to make all my purchases simply as a convenience and to obtain the cash-back value that my particular card provides. If they were to impose the structure indicated in the article, I could just as easily go to debit-card only purchasing, leaving me out of the issue entirely; where would that leave the mismanaged debtors then?

Bought a house you couldn't afford? That's cool, we'll pay for it and make sure nobody else can get a loan for years.

Spent more than you could pay on your credit card? No problem, people who pay theirs off will help you out against their will.

Spend, spend, spend! Someone else will pay it off for you!

@SadSam: Problem is, the CC companies need 'good customers' more than the 'good customers' need them. I don't carry a balance. I will never pay an annual fee for a credit card, nor will I use one that doesn't have a grace period. The only reason I usually use a credit card is for convenience and rewards. Take away both of those things and there's no more reason to use a card. I'll be damned if I use a credit card at the supermarket and pay interest on groceries because there's no grace period. People in line behind me will have to wait while I write out a check.

I know this because, if ONE of my credit cards tries this bullshit, I'll just not use it. I'll give my business to the company that DOES NOT fuck me over. The company that tries to do pull these shenanigans will go out out business, if all goes well...

See here's the problem: Their salaries are WAAAAAYYYYY too much. They've been making WAAAAYYY too much money for what value they bring. The might have to take pay cuts if they want to stay wealthy and employed as head execs of these companies. That or go out of business because we all stop using the damned things.

I got cash in reserves. I live within my means. You fuck with me, I cut up your card, and you stop making money off of the transactions too.

GO AHEAD. FUCK WITH ME. FUCK WITH ME, I FUCKING DARE YOU.

Wife and I will just carry cash and keep one card empty for trips.

@ztoop:

At every place I've worked, the transaction fees are more like 5-6% *plus* a flat-fee on top of that. AmEx, Discover, and Diner's Club charge substantially higher transaction fees than the other companies to boot.

@SacraBos:

"Universal Default" isn't collusion, just poor ethics and morals. There's nothing (in a civil sence) *legally* wrong with saying "Hey, that guy defaulted on his other account, he's probably going to be defaulting here, too. Let's overcharge him BEFORE he doesn't have any money left!"

@dragonfire81: That's right.

+1, best post I've seen from you

This must not be counting the 10¢ plus 1-2% on every transaction the credit card company takes.

Well, time to dust off my checkbook.

So many people in America would whine about credit cards companies being greedy rather than managing their own debts. They don't mind being greedy themselves when buying things they can't afford, but they DO mind others being as greedy. You can't have a pie and eat it too.

I think the best thing to happen is exactly that - let credit card companies to raise APR, annual fees, and lower credit limits. It will only help educate the audience that debt != free money.

And if it causes few more bankruptcies, we won't even notice it across the mortgage mess anyway.

Responsible people who pay bills in full will just switch to check cards or debit purchases.

@econobiker: Absolutely! It was fun calling up and asking for $25K-50K credit limits, trying to extend the 0% balance transfer period and limit the balance transfer fee to $100 max. Once they agreed, we would promptly transfer over an amount of about 90% of the CC limit.
When we started this, our credit limit was stellar, and we did take a hit on our credit score and the CC offers that once stuffed our mailbox started to stop. Once we paid off our "CC Debt" and cancled some of the credit cards that we used to do this, the credit score immediately bounced back. My spouse and I calculated that we had at our max credit cards with a combined credit limit of almost $1M. And then the CC companies wonder why American's are drowning in debt...why does an upper middle class family need a $1M credit card limit, 75% was with the same bank (except to borrow the bank's money for 18-24mos interest free.)

The current crop of executives in the U.S. don't understand how business works because they've never been anything but executives. Give me a worker who has risen through the ranks over an MBA any day.

@edison234:

While we still use credit for travel, debit card works just fine as well.

I think this plan makes sense on one level in that if the CC can't make money of the "bad customers" they will make it off of the "good customers" or they will somehow figure out how to make it off both and those in the middle. I certainly remember when you had to pay an annual fee for a credit card and when they only gave credit to folks who could actually pay it back, all those cash back and free airline tickets cost money and if they can't make it off the bad folks they have to scale back the rewards and return to old models.

Most people here are upset that they no longer will have the convenience of a credit card because they are unwilling to pay annual fees or immediate interest. While I don't support the immediate interest, I'm beginning to not feel so bad about paying a fee. Truth be told, you are getting a "tool" as many have refered to it that allows you to make transactions without having to carry around a lot of cash.

Last time I checked, most useful products available to consumers cost money. If a company like Chase is going to charge me $30/year for the convenience of putting the down payment on a car which I pay off at the end of the month, I don't see an issue. I don't want to carry around $2500 in cash which can get lost or stolen. If I lose or have my credit card stolen, I simply call up the company and tell them to turn it off and send me a new one, oh and any purchase made during that time can be easily disputed. I'd like to see you go into a bank and try to get that $2500 back because someone mugged you, you'd be laughed out of the bank.

On top of this, these fees will discourage a lot of bad credit card users from ever getting the card in the first place. Most of these people have a horrible concept of currency and telling them they owe $30-$50 a year just to have the card in their pocket will only make them think twice before getting card after card.

Now if they start charging interest right away, I'll probably cancel all my cards, but depending on the annual fee and my other options, I wouldn't totally be against paying for the convenience of having a credit card. It sure beats paying a licensed gun carrier to be at my side at all times whenever I'm carrying more then $100 in cash.

So even banks are already screwing good credit customers now, they PROMISE that they will screw them more if the reform passes?

I think banks needs the type of regulation that government puts on utility companies. Banking has sort of become a utility in today's society and should be regulated as utility companies.

I'm more concerned about my 5% back gas/grocery/drug store credit card. I have no fee on that, and I get back hundreds of dollars every year.

@joellevand: Nice post. All of the above.
The CCs are starting to eat their own tail, so to speak, and I'll be actively waiting for them to realize it.

They aren't hurting for money, it's all greed.

Right. It is greed in the form of entitlement. The robber barons of the banking system, the members of the RIAA, of the MPAA, and of the Association of American Publishers and others feel entitled to continue making the same profit (or better) as they have historically made. For them, the success of a business model is not contingent on socio-economic factors but is some sort of axiom or a natural law (like the law of gravity). So for bankers if the CC industry has made X amount of profit in past years, it can certainly not be less profitable in the future, irrespective of how society changes. They will do everything to protect their short-term revenue, including enact changes that (ironically) will destroy their industry.

Hey, fine by me. I have zero need for credit cards. I use them because they're convenient. Make it expensive or difficult and I'll hack 'em up and go back to cash. No big deal.

@whydidnt: The "ill-gotten gains" is the flat screen TV put on a credit card that you don't have the means to pay.

These credit card bankers are begining to act like junkies except in their case they were addicted to exhorbitant fees & interest . Oh no ! there goes that bonus .

They're acting like a kid being punished threatening to run away from home .

Don't cry credit card bankers I'm sure your accountants & lawyers will show you the loopholes and tell you how to make money as usual .

BTW - If you have any annoying mail that comes with a postage paid envelope fill that sucker to the brim with anything you want. It'll keep the postal workers busy and make the stupid companies have to pay to get the junk back. The ultimate recycling!

@I Love New Jersey: Those responsible people are not as profitable as the irresponsible ones. Banks are sad to see the money going away...

Agreed. They THINK they're threatening everyone, but they're just digging their own grave.

You're assuming a lot :)

1) That the members vote

2) That the voting members are also credit card users, many many CU members are probably just using the bank for checking and savings

3) That the voting members who are credit card users see this as an entirely bad thing

I general I've found that CU credit cards typically have lousy rewards programs, but in exchange they provide more reasonable APR rates. My CU has an 8% APR, probably the folks using this card are using it because they carry a balance and this is one of the cheaper (and more stable) ways to carry the balance cheaply

@swearint: Walmart bailed on layaway and offered up some credit card they own.

@pecan 3.14159265: Checks are even problematic now with the likes of Certegy check verification service around.

[www.fidelityinfoservices.com]

[www.google.com]

We had a check refused based on Certegy's response to a merchant phone inquiry. Certegy is the next "worst" thing to a credit report bureau...

Not accurate.

Credit card companies charge merchants a percentage (1-3%) of every transaction as their fee... this alone represents MASSIVE amounts of money for the credit card companies and is generated by all use.

Do the card companies make money off of interest, fees and penalties? Of course ... but if no one ever defaulted and instead paid off their cards on a regular basis, does that mean the CC companies will go out of business? Not by a long shot.

@My father was a service droid!!!:

"The language of the card agreements gives the issuers significant leeway in changing rates and fee structures, so how is any of this deceptive?"

Because they deliberatly engineer it for failure by the consumer via the mouseprint sized terms and condition documents.

Example: That they move the due date around so that it encourages late pays by automatic deduction payers.

Example: Why do you think a card company would issue two or three low credit limit cards to the same person versus combining the limit onto one card? Because that is 2s or 3x more opportunity for that person to be over limit and late paying.

1) Increase the interest rate on the money they have to pay back, about 200% should do nicely.
2) Charge exorbitant late fees (these guys never pay on time)
3) Lower their credit limit without warning (then tell them they are over their limit and charge for going over as well).

And last but not least, we can always demand our money back and let them fend for themselves. I'd like to be able to call a few of those banks and say "I don't like the way you do business, please send me my portion of the $10 billion you borrowed, I never wanted to give it to you anyway. Thank you and have a nice day."

@pecan 3.14159265:

Thats fine, you may just have to pay for that convienence through interest then. Every transation has its good and bad points.

I used the visa branded debit card online once a few times, and of course, the number got stolen. I got the money back, but it was a lot easier when it happened on a credit card. The credit union was just so small, and so ill prepared that they really were of little help. I'll probably still use a CC online and pay a premium if there is enough incentive, unless we can get the Credit Union where I hold the debit card to get us some secure online numbers.

No matter what, these companies are going to have to adapt to keep making money. Dont sweat it! Its just how its going to have to work I think.

Credit cards are a tool. I have the money to pay for whatever I put on my credit card. Why not just use cash, you say...well, the problem is, I don't want to carry around cash all the time. I forget I'm out of something, I don't want to have to plan for how much money I'm using every week just to be able to buy the bottle of shampoo I forgot about last week. It's about convenience, for me anyway.

Above all else...I don't want to carry $40 and a bunch of loose change.

@Rachacha: You are like a credit bad a.ss that the companies would hate. Good for you.

I understand the concept but this type of thing would explode Dave Ramsey's and Suze Orman's brains...

Don't believe the hype.

@Etoiles:

The fact that gamestop couldnt get a check processed is awesome. It really speaks to how convienent the credit card companies have made the cards. I wish I would have been able to make a product that so many people rely on. Would be so sweet to have 4% of someone elses money.

These arrogant assholes are conceited enough to believe :

That lots of good customers will not abandon their payment system for something with less transactional friction.They will. Smart customers don't pay fees now. That won't change because they have to please Wall Street.

That some hungry competitor won't change the game completely,making them obsolete.The margins in this business are too damn high to shut out competition forever.

That alternative service providers like credit unions and such won't undercut them on price and service.It's happening now in a smaller way,but as their customers explore altenatives and move their business from the giant card issuers to local competitors,there will be less marketing $$ to try to rope in new customers.Lather ,rinse, repeat the cycle as they raise fees and charges.They are fucked,I tells ya, FUCKED.

We can almost stand back and watch the old banking order crumbling here,right before our eyes. To be sure,something bad will replace it,but to see these guys humbled will too good to miss.

@pecan 3.14159265:

Psst. you can use a check on amazon too. Its crazy! I know!

I always thought that I can afford to cull some of my deposit accounts. So, Bank of America (through FIA Card Services) or Chase... your move. This undergrad values package relationships and will match moves accordingly.

@edebaby: I would argue that it is the other way 'round--those who manage credit wisely are subsidized by those poor schulbs paying 25% interest. None of my CC companies have ever gotten a red cent [directly] from me--they are able to remain afloat on the backs of merchant fees and those who pay interest.

@oldgraygeek: If they charge me fees or interest immediately then I'll just use my check card. I don't carry a balance, I just want the cash back.

Your only risk there would be overdrafts I suppose since transactions take a few days to post.

If my CC starts playing games I'll pay cash for everything or start writing checks.

Spot on.

I put ~$20-25K through cards every year--I pay for literally everything with them, then every 2 weeks I pay whatever the balance is, never pay interest.

The card I use most pays 1-2% cash back on average, but has a 24% APR (which I've never paid) ... if the "immediate interest" portion of this threat were to occur then I would end up paying ~1% interest if I continue to pay off my cards every 2 weeks, at that point it would still be about a wash when I consider the cash back. If the cash back goes away, then I would be paying money for the convenience of using the card, at which point I would be looking for every route to avoid paying that--such as paper checks, ETF, debit cards, cash :shudder:... whatever...

This is only going to hurt the CC companies on the long run by decreasing usage by responsible users, and increasing the burden on those groups that are already defaulting.

All hell, they could create a fee called the 'You Opted Out Of Our Cross Marketing Revenue Path Fee'. Or a 'Good Customer Fee'.

That stupid Spiderman Capital One "Fraudulent Charges" commercial comes to my mind.

Charging interest immediately on a purchase
...awesome, less CC use...

Reinstating annual fees
...awesome, less CC users...

Further curtailing cash-back and other rewards programs, like frequent flyer miles
...awesome, because only people that have money/CC get rewarded, poor people w/o CC pay extra markup so stores can offer CC payments, but dont see anything back from it

Wow, a lucid response in a sea of inanity.

@pecan 3.14159265:

Amazingly yes, most people are more than willing to accept checks. They dont have to pay a percentage of the transaction to deposit a check.

Thats cool that you have never had to use a check though. Its a different world today isnt it?

I think if we demand it, we could get banks to start making secure online numbers available for debit cards. It would be a great way not to have any debt and move away from the credit cards.

Don't worry, free market, I have faith you'll punish the baddies and deliver the good ones running responsible business models to me!

(Although I have to give them credit: for too long, sub-prime mortgage brokers were earning consumer hatred. It's nice to see the credit card industry working so hard to regain their rightful place as most despised financial company in America.)

Collusion anyone?

You are right. This is just fear mongering at its finest! They like to pretend we are all deadbeats, but it is the easy consumers like us that give them a _steady_ profits. Even if they only make 1.5% on transactiion fees (3% fees - 1.5% rewards) they are making a crap load of money. Some local governments run on sales tax that isn't much higher than this (say 5-6%).

For many credit unions, the shareholders ARE the very same members that they serve. And I'll be damned if everyone unanimously and intentionally vote towards screwing themselves.

@pecan 3.14159265: Agree with careful usage of debit cards. I personally think it's safest to use them only when you can observe the prices being rung up in front of you and leave with the merchandise by your side.

But some people legitimately can't get credit cards. Can't do much there. But those who can get credit cards and later complains that something went awry... well, they picked their own poison.

I always pay my bill in full at the end of the month. If, however, my CC company (Amex) starts to charge an annual fee or instant interest, I will find a credit union that doesn't and just use them. The way I see it:

Those banks that try to screw the good customers will end up losing them and having to close their CC divisions. Consumers are smart and will flock to those companies/credit unions that don't screw them.

It will be the end of Credit Cards as we know them but that's a GOOD thing!

And if there are none, it's debit card time. I get pissed at any company (or group of companies) who ASSUMES I need them (ex: Cable company, dropped my service last year).

I'll make do. I have standards for how I'll be treated.

Leveling the playing field is false. There is none of that happening. Credit card companies will continue to attempt to screw over people.

Hopefully the gov will call their bluff...in a Toyota Hilux of course. ;)

Please stop parroting conservative scaremongering points.

[www.everythingisdesign.com]

The day this happens is the day I start carrying cash again.

How does this situation fall under socialism again?

@Saboth: In theory, however, we all subsidize someone. I pay taxes that support the schools, but don't have kids. I buy health insurance, but may not use it as much as others. Some people pay into Social Security for years, but die before collecting.

@captadam: The insurance industry is an excellent parallel as to why this isn't socialism. As an honest purchaser of insurance, there is a portion of my premium that goes to cover insurance fraud where the insurer is taken to the cleaners.

I love how credit card companies think they're magical and important.

Or even better, maybe I'll have to cut back on my online purchases since I won't have a usable CC, saving even MORE money.

@Etoiles:

Good points, but these issues have always existed. I use a check when I buy large items. For purchases over the internet, I do use a credit card. You might also be able to use a debit card there though.

But you are right, because people misuse something doesnt mean we all shouldnt be able to use. But look at it honestly, the reason it doesnt cost you too much to use a card now is because the saps at the bottom rung of it are paying so much. The companies hope you will miss a payment or choose to pay a little less this next month, so they can make a little more off of you.

Its the business model. If you regulate it to be something else, they have to change how they make money. They have shareholders to report to.

@Mary Marsala with Fries:
exactly - keep pushing guys, I don't need your cards.

The language of the card agreements gives the issuers significant leeway in changing rates and fee structures, so how is any of this deceptive?

If you do not understand the agreements, do not use the cards! Take a lesson from Warren Buffet: "If I don't understand it, I don't buy it!"

I do this because of the rewards and the convenience. Obviously, I pay no interest fees. If I am going to have to start paying interest from the first moment, then I'll stop handling money this way. I can easily do it, since there is money each month to pay off the previous month's balance. But, the hard part will be that first month of the switch--I will, in effect, have to pay two months' worth of groceries and gasoline that month. That's been the deterrent each time I've considered switching to paying cash (or debit) for all those purchases.

You're not a Luddite. But this makes me nervous because I don't have a credit card and I'm feeling like I might need one if something happens to my car, or something. I just can't lay out what it would cost for a major repair. At least with a card, I could pay it off, even if it took a while. The reason I didn't get one before was the fee game.

Grrrr!

Nobody deserves to make a profit from ripping people off. Quit whining and find a way to make money honestly, will you?

20% interest is usury, plain and simple. The fact that they were charging more than that, and doing worse besides, is indefensible.

My credit cards make nice emergency stashes and I use them responsibly -- but having them isn't worth supporting companies like these. They can go ahead and "clamp down" on me, and I'll leave forever, and we'll both be better off for it. Yay.

I want to personally thank the Credit Card Companies for allowing me to place my mortgage on 0% interest* cards for 3 years and pay down the principle. My once 30yr mortgage is set to be paid off in 10 years. I guess those days are long gone.

*WARNING: doing this is not for the faint of heart. If you are late on a payment, the 0% immediately goes away, and you are charged +30% interest, and that will trickle through all of your CCs. I had a HELOC so that if I needed to unload all of the CC balances I could do so immediately, and I could lock in a reasonable 4-5% interest rate.

I charge EVERYTHING on my reward credit card(s). The transaction fees my credit card company is charging from retailers are making them a LOT of money over the course of the year.

I will never use a credit card with annual fees, and if they start f***ing with the terms on my credit cards, they will be cut and I will just go back to using cash.

And if they all decided to follow suit, debit cards are a perfectly good alternative. Mine even gives me extended warranty coverage. I only use credit cards for the rewards. If things like this or the idea of making credit card payers pay extra to cover the merchant fee come to pass I just won't use them any more.

So, go for it banks. Cut if your nose to spite your face - I dare you.

Yes, some people use credit cards to spend money they don't actually have. Some people go way too far with it and are tens of thousands of dollars in stupid debt. But "that makes credit cards bad for everyone" is the same kind of logic that says if my neighbor is a 500-pound alcoholic, I shouldn't be able to enjoy a cheeseburger and a beer from time to time.

It's limit (yes, you only got one of these cards, from your own bank, with which you had to have an account) was much, much lower, the APR was around 20%, and yes, there was an annual fee, usually $10 - $15 a year, unless you were one of their high rollers. With inflation, expect that to jump to around thirty bucks. The bank didn't solicit your business by bombarding your mailbox; you had to go there and ask for a card.

Remember the American Express green card? That was the card most people aspired to, after a couple of years of not screwing up their credit with their BankAmericard (now Visa) or MasterCharge (now MasterCard). Forget about the gold card or the then-nonexistent Platinum card. Those were for the kind of high rollers who lived in a big mansion with a Mercedes and a sauna and room for a pony. Not you.

The original Amex worked like this. It had a higher (or no) limit, but you had to pay it off in full every month. If you didn't, you couldn't use it anymore until you did. And the annual fee was higher for those of you who wanted to keep up appearances.

It was a lot harder to really fuck up your credit on credit cards. It could be done, but going completely bankrupt solely on the basis of your abuse of plastic was rare.

So what I see happening is that most people will go down to one or two cards with smaller limits, or even zero cards if they can't find one with acceptable terms. We might not go all the way back to the Carter era, but we might go back to about 1985 as far as plastic goes. I think I had one card with a $1200 limit that kept getting maxed out because my car was a typical 1980s shitbox that liked the inside of our mechanic's shop.

By going after "good credit"customers and those who pay off on time, they will be creating a vacuum in the credit business that I assure you WILL be filled. That vacuum is simply cheaper credit.

First people will move to debit cards. But in this case we're talking about the same companies so fees and restrictions would quickly apply. Remember no ATM fees? They added them and it never halted ATM transactions.

The idea that one/everyone would go back to strictly checks and cash is highly unlikely.

Eventually people will turn to "something else".

One major binding issue that banks have is that they're publicly held and therefore have to constantly increase profit no matter what. Like I said above: a vacuum will form - Cheaper credit for a more "modest" profit.

maybe the next great financial industry lies in the current Credit Union business...?

@KevinReyn: That is exactly what they want though. Assuming you were a "good" consumer who used a CC for daily purchases, and paid it off every month and collected bonus points for hotels, air travel, gas stations etc., you were (conceivably) costing the bank money, hence the reason why they want to cut credit limits and increase annual cost of the cards. By leaving, they are only losing the money that would have come in from the merchant for the percentage of your purchase.

Not to mention that unless every single credit card company starts charging annual fees and interest on individual purchases, I'll just find a different company to do business with.

But I'm not into hand holding, and I don't think we good cardholders should be punished for the careless mistakes of others.

* Didn't they just increase *my* interest rate to 30% "because of market conditions"?
* Haven't they for years been increasing fees, penalties and surcharges for every possible insane reason?

Do these guys really think I am that stupid?

I have been paying for year for their poor judgment.

If you threaten someone, you need to make sure you can make good in the threat if you don't get your way. Banks can't. They have been punishing their good customers for years.

In line with other commenters, they will only hurt their business, because people will stop using their products. Do they really think 1% chargeback is enough to keep me? Seriously, I'll go cash again, and I'll keep one card for online purchases.

5. Dave Ramsey laughs maniacally in triumph.

But then I refinanced and now US Bank will let me do EFTs, so I thought I was done writing checks.

Why? Because I put EVERYTHING on my credit card. My electric bill, my cable, my groceries, gas, whatever. If I spend money it's going on my credit card, which I then pay off every single month, all for the rewards that I earn.

I NEVER carry a balance. EVER.

So go ahead, charge me interest immediately, and Chase will see how quickly I stop using that card.

I guess I'll have to dig my checkbook back out.

1. Credit card companies reinstate annual fees and charge interest even if you pay the bill in full every month.

2. Smart consumers who always pay the bill in full every month and only use the card for the rewards will do the (relatively simple) math and figure out that they're now losing money no matter how you slice it by using a credit card.

3. Smart consumers who use debt wisely leave the credit cards behind (or throw all their collective weight behind one bank that decides not to redistribute the pain).

4. Burdened by people with poor credit who don't make payments on time and otherwise are a drain on the CCs, many banks shut down their credit card divisions.

The end.

Next thing they will tell us that if they can't make huge salaries, the entire economy will go under and they need their own TARP program.

@Troy F.: What the credit card companies want is a customer that barely pays the minimum balance every month and occasionally misses a payment or overdraws so they have to pay some sort of fee. At the same time they collect the fee, they jack the interest rate up even higher. People that pay their balances in full or pay well over the minimum balance make a profit for the companies, but not really high profits like people that pay the minimum and rack up lots of fees.

@pecan 3.14159265:

I think credit cards are the wrong path for a lot of people. If you wait until you have cash to buy something the risk of overspending is greatly decreased. On top of this, there is a percentage charged by all CC companies that accept credit cards. To make up the money, everyone pays more.

I have credit cards, but dont use them in many cases. If you manage them well, its fine. But in many peoples cases, they can get out of hand. The average debt americans face should tell you that.

They will still make very good profits on people who carry a balance and even those the PIFers. They just won't be as obscene as they were. The problem is they were really raking it in for a few years and now they expect it. I guess the normal credit card services were just a loss leader for the fees?

They can't start treating the PIF customers bad, they can go elsewhere.

America needs to rediscover an old concept called 'lay-away'. I bought my living room furniture that way, and since it had to be ordered anyway, the instant gratification of using credit was not an issue.

so the credit card companies likely have good credit ratings right(or even their employees)? Well won't they just be hurting themselves?

"You are going to force us to become MORE despotic, you wait and see!"
There is a reason my husband and I don't use credit cards. Past all the reward programs and incentives, it really isn't worth it in our situation. I'll not dish on those who do because I've heard some very valid reasons to have a card (Credit score, overseas travel, reward programs) but I dislike these companies so much I'm be hard pressed to deal with them.
Am I a Luddite for advocating less credit as a good thing? Perhaps a society where your average Joe Schmoe buys what he can afford and saves for what he can't is a good thing? Sure, our economy will experience a loss of growth but the slower growth with have a solid footing not based on consumer debt as an industry.
On a side note, weren't good card holders ALWAYS subsidizing bad cardholders? If they were not, how was the company making any money?

I'd say they are bluffing! They're taking a page from the Bush administration playbook: scare the population to get what you want.

Having said that, let's see what really happens. I put everything on my credit card, spending and paying of around 3k each month. If the bank is getting 3% in interchange fees they are earning $90.00/month simply for processing my charges and payments. If my current issuer doesn't like that arrangement, I suspect It will be easy enough for me to find one that does.

If the big banks follow through on their threats, I suspect Discover and smaller banks will look at this as an opportunity. We may have to move our relationship, but it's likely I'll find a good rewards card that still provides a grace period and doesn't have a fee.

Funny thing is that if banks follow through with these plans, they'll just further erode the quality of their card base, driving the most credit-worthy customers to their competition.

@hedonia: Ok, I'll do it while wearing one of those arrow through the head thingys. Worked for Steve Martin.

@jeffbone: *AND* those of us who pay in full every month can just as easily forego the gutted rewards we were getting and just pay with cash.

There two kinds of people in the world...those that can pay you back and those that can't.

I can't imagine why a lender would prefer to lend to people that can't pay him back, but what the heck do I know?

Thing is, you can't make profits off customers you don't have. And, as I've said before, these reforms are nothing new in the UK.

I sense bluster. Sounds like the States' Restaurant Associations that fought smokefree restaurants saying it would signal the DEATH of the restaurant business. After smokefree, restaurants (save for the current economic downturn) have INCREASED business. Now Restaurant Associations like Texas are working for its introduction. I can see the credit card issuers/banks doing just fine if they eliminate these parasitic fees. They will kick and scream until it happens and then be surprised at how profitable the right way of doing this is.

But how is that funny?

@giggitygoo: The banker at my credit union almost seemed disappointed when I didn't want more money for an auto loan a few months ago. I wonder if going in and asking about a credit card would brighten his mood.

If D.C. wanted to do some reform that would have impact, they'd look at legislation that would seriously reduce the need for credit cards which have become almost the default pay/id system for almost everything. Fix that and a lot of people who shouldn't have cards will drop them, a lot of people who are being screwed by their cards will drop them.

The consumer credit industry is cannibalizing itself, I think.

@aedude01: I haven't tried to pay cash for an airline ticket or a car rental lately, but I've heard it is a pain in the ass.

Oh, I suspect the free market economy will sort this out. Credit card companies will contract the available credit (there's too much of it out there anyway, and consumers need to be weened off theier excessive dependence on it). Then any company that offers decent treatment of its better customers will be rewarded, and the the other companies will follow suit.

In a rational world, the reverse would be true. It's at least partially true under the current model, assuming the article is correct about the profit estimates from current late and overlimit fees. Then again, it's now national policy to reward (or at least tolerate) poor behavior, so why should this new idea be a surprise?

Oldgraygeek makes an excellent point, which Mr. Yingling conveniently overlooked: those of us who pay off in full every month still make money for the CC companies thanks to the merchant fees.

Continuing to hunker down, here...

@chrisexv6: I'll save the postage and just cancel by phone and cut them up and throw them in the trash.

This reminds me of the scene in Blazing saddles where the sheriff holds a gun to his own head. If you don't lets us have our way then we'll stop doing business.

These changes really just get us back to the classic business model of banks loaning money and making a profit off of the interest. In the last decade or so banks have moved to a fee and penalty based model. Send statements out so they arrive on a Friday where there is a slightly higher chance of that they will be forgotten. Switch from monthly statements to 28 day periods so that there is a slightly higher rate of late payments. Any tweak they can think of to raise the defaults so they can collect a late fee.

"Those that manage their credit well will in some degree subsidize those that have credit problems."

Socialism creeping in everywhere it seems...

From the sounds of the article, the banks have a word other than "customers" for people that pay their bills in full every month (i.e. be responsible with their credit).

(don't use them but haven't bothered to cancel due to buying a house and not wanting to hurt my credit rating).

I wonder how debt cards will play out?

I predict that much of this initiative will backfire because of competition: if BofA does this to us, we'll simply move our $3000 worth of monthly purchases to Discover or AmEx. So will every other customer who does what we're doing.

Awesome! Maybe this will help keep people from getting off on a wrong path.

yep I agree 100% These bastards need to be taught a lesson once and for all. First they should have been allowed to fail, now that they have been propped back up and have decided to stick a shiv in the backs of those of us who propped them up, I think its high time we consumers cease and desist all activities with companies that do this.

If its all about the money then lets play by their rules, you ding us we drop you.