Credit Cards: Many Ways To Bilk You

Finally the public will be protected from the rates and fees that Banks charge their credit card account holders. Congress passed legislation restricting the rules on Banks changing rates as freely as they have been able to in the past. Unfortunately as with most laws, the timing of when the law goes into effect and when it was passed gives the Banking industry plenty of time to make changes before they are restricted. As a consequence many, if not most, credit card holders are getting letters announcing rate changes and new fee structures for various activities to basically increase the Banks’ ability to get as much revenues from you as possible. Now there is nothing illegal about what the Banks are doing. They are a business operating within the laws and regulations that constrain them.

What the Banks are doing is ensuring that these many changes to allow you to pay even more than before for the same service and benefits that you have had for years. The biggest problem for individual credit card holders is that they will have to be very alert to how their particular bank is treating them. The rates and fees being charged can vary greatly from one issuer to another. And thus there are some people who will be paying enormous amounts to their bank, and probably way beyond what is affordable for them.

The sad part of this is that the Banks’ actions are detrimental to both the Banks and to the consumers. The Banks are trying to maintain high levels of profits for their stockholders and for their bonuses. In the short term this will allow them to take a large amount of the public’s money and divert it to their accounts. No real benefit or value will be provided in exchange for this transfer of wealth, it will just make sure that more of your money goes to protect their income stream. In the long term this will actually suppress the financial industry, the market-place and the economy overall. This retraction will come from diverting consumer income to none-productive spending on interest charges and fees that do not drive any product or service sector of the economy to help stimulate business. This effectively will reduce the dollars going into these businesses which will result in lower growth, or worse a real retraction that damages everyone.

It would appear that the Banks have forgotten that one of the values that the credit card industry contributed to the economy in the past is that it helped stimulate purchases which provided growth to businesses and in turn to the incomes of their employees. These increasing incomes from employees get directed back into the economy through their purchases both cash and credit. What the banks are overlooking is that they benefit in proportion to the growth in the economy from contributing to a prosperous middle-class. The extra-high rates and fees are reducing the number of people who are in the middle-class and thus their own revenue base. While people in the lower income groups are sources to credit card companies, they are not responsible for most of the revenues.

So what should the banks be doing, and what should Congress have done? The Banks should be looking to keep their rates and fees a low as possible not the opposite. And Congress, well as usual they reacted to the stupidity of the Banking industry going ultra-greedy and just tried to limit how quickly and easily the Banks could reach greedier and greedier levels. Congress should have looked to solutions that would reward intelligent bank credit card operations and disadvantage predatory and ill-conceived profit strategies by banks that are clearly only in the business to rip off the consumers.

Once again we see a lack of insight and intelligence on the part of our Government and on part of the executives that we are all allowed to reward with boundless salaries, bonuses and perks.

Hey! Ya get what ya pay for!