Mike Beversluis

Wednesday, May 20, 2009

Who needs whom?

There is some noise here about credit card companies finding ways to charge fees to people who pay off their balances each month: Credit Card Industry Aims to Profit From Sterling Payers

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.

To which I say, good luck. I pay off my balances each month, and if they really do start charging me fees, I will cancel my cards and just use cash instead. Maybe I am of little value to them, since I don't really ever pay interest or late fees, but many people act like I do, I'm not sure how this will get them that much more money.

Incidentally, a lot of free-market sympathy for them as businesses went away once I realized that the changes to bankruptcy law made their loans more secure. Charging 18% for unsecured debt is one thing; It's another to charge that for debt that has been in many ways secured by means-tested bankruptcy laws.

Also, the point behind this rather tone-deaf quote is wrong:

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.”

Merchants have to pay fees in order to use credit cards, and guess who pays those fees? That's not much of a free ride.

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