I’m sure none of us needs a reminder as to why we despise the credit card industry. However, the mortgage industry mayhem that’s been all the buzz is now moving to the credit card industry as lenders try to recoup the damage. To alleviate their pain, credit card companies will now look to us by conveniently raising rates and fees. It’s only a matter of time until you and I feel the impact but it is imperative that you become aware. Aside from some legal gobbledygook we’ll get in the mail, the card issuers won’t be the ones to inform us we’ll be footing the bill for the problems they created in the first pace.
I saw this coming from a mile away. Credit card companies and banks need to get the money back somehow. Say goodbye to the no-fee balance transfer and farewell to the zero percent introductory APR. Say hello to higher minimum payments and interest rates. The Truth About Credit Cards reports that Capital One plans to raise interest rates on some cards to almost 14 percent, up from 5 percent.
And consumers aren’t the only targets. More after the jump.
Visa and Mastercard will certainly get merchants into the mix, including many small businesses and online-only retailers. My organization at the Merchants Payment Coalition suspects that banks will impose greater interchange fees to bail themselves out. ConsumerAffairs.com points to the monopoly that Visa and Mastercard enjoy:
That’s something I hadn’t considered, and it makes a lot of sense. Given the monopoly power Visa and MasterCard—and their partner banks—exert in setting fees for using plastic in transactions, it wouldn’t surprise me if hapless merchants suddenly saw their fees take another spike in order to ensure an available liquidity pool for banks.
I suggest Visa and Mastercard pay consumers back for every new fee increase they impose. Why not -- the interchange fee brings in about $40 billion dollar a year. They can certainly afford it. Just hold off on the stealth marketing for awhile.
The credit pain is real and it will only get worse. It’s felt by merchants and consumers alike due to the irresponsible practices and policies of the card issuers. One might wonder why the card industry would raise rates and fees given the Congressional scrutiny of late. On the other hand, I’m not shocked that they would place the burden on unsuspecting consumers and merchants.
It’s time that the credit card industry pony up and level with its constituencies. Today the New York Times highlighted how credit card companies target unknowing college students:
The credit card industry has made a profitable art of corralling consumers into ruinous interest rates and hidden penalties that keep even people who pay their bills permanently mired in debt. The companies are especially eager to target freshly minted college students, who are naïve in money matters and especially vulnerable to credit card offers that are too good to be true...
Congress, when it convenes next week, should move forward with planned legislation that would tighten federal supervision over the credit card industry while improving disclosure laws and outlawing deceptive practices.
I agree with the Times that the curtain the credit card companies and banks have been hiding behind must be unveiled. Congress has the ability to make waves this fall and we hope you’ll join me in fighting interchange and other unfair credit card fees.