With the Fed poised to announce stringent new credit card industry laws tomorrow, the future of credit cards might be changing. Banks are waiting to see how tough the new legislation will be. So far, it sounds like a good deal for consumers, but not for card companies.
Most of the controversy surrounding the new laws centers on one rule: that credit card companies cannot raise interest rates on existing balances as long as the card holder doesn’t fall 30 days behind on their payments. Insiders speculate that this rule alone will cost the industry $12 billion per year.
Consumers, who have long felt that banks use unfair practices in regard to credit cards, wrote in to the Federal Reserve when the legislation was still in its planning stages. More than 60,000 people told the Fed how they felt about the industry – and most of them demanded change.
How will such a change affect future card holders? Edward Yingling, chief executive of the American Bankers Association, says, “[The new legislation] will in some fundamental ways change the product.” That is, new card holders probably won't see the low-interest teaser rates that were so common before. Rates in general will probably go up for new customers as the credit industry tries to recoup some of its losses.
The market is changing, and we'll just have to wait and see how much of it changes for the better.
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