Good news: Responsible credit-card users to “subsidize” deadbeats now

posted at 11:40 am on May 19, 2009 by Allahpundit

Just a little friendly congressional intervention in the marketplace to shift risk from people who can’t afford the product to people who can. Hey — it worked out with mortgages, didn’t it?

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.

Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.

“It will be a different business,” said Edward L. Yingling, the chief executive of the American Bankers Association, which has been lobbying Congress for more lenient legislation on behalf of the nation’s biggest banks. “Those that manage their credit well will in some degree subsidize those that have credit problems.”…

The industry says that the proposals will force banks to issue fewer credit cards at greater cost to the current cardholders.

You’re already helping to pay off deadbeats’ homes. Why not help free them up to rack up some more credit-card debt too? I’m going to poll this one just because I’m curious to see what HA readers’ habits are, but I’ll tell you it’s been at least 10 years since I let any part of a monthly bill carry over to the next month. Good to know I’ll be paying interest now regardless. Exit question: Er, isn’t this an exceedingly bad idea during a recession? People with good credit will be less likely to make major purchases for fear of the monthly interest and people with bad credit will be more likely to start charging, and then inevitably defaulting. Good work, Congress.

Related Posts:

Breaking on Hot Air



Trackback URL


Most important, don’t take the credit cut-backs personally.

This is simply nothing more than there’s no credit flowing, people.

AnninCA on May 20, 2009 at 1:01 AM

In other words, “Pagan justos por pecadores.” [“The just ones pay for the sinners.”]

Beautiful! Those who do the right thing are going to give the irresponsible people the free car, free TVs and free everything else that Obama promised to them!

A shining example of those we might subsidize is this intellectual moron – an economics writer for the NYT who went in waaay over his head on credit cards and mortgage bills, who wrote a book about his experience and how the blame for all of his mess goes to “Them”, not to himself for allowing all of that to happen.

Heck, even Megan McArdle caught on to his schtick and just about recanted what she first said about him!

You got to crunch the numbers for this guy: he couldn’t afford the lifestyle he wanted to keep with those debts in the first place. Out of $120k from his job, a third (assuming) went into taxes, a higher than a third went into alimony and child support (48k for an ex-wife and two kids getting into college years!), thus leaving him with an impossible take-home salary for anyone who lives in the DC metropolitan area! Of course, let’s add a new wife and two new kids to support – which he did. A wife who didn’t work for a long time! Then, they racked up the debts! Yet, they blame the banks and the credit issuers!

Brilliant! :-/

newton on May 20, 2009 at 1:50 AM

If the fees go up, the card goes up – in smoke.


herself on May 20, 2009 at 2:47 AM

Dear goopers, so I guess now you have deemed your way back out of the wilderness. Any bill passed by the Democrats you go full attack mode. Doesn’t matter what bill it is, attack it.Funny thing is, we had 8 years of you goopers, and your boy Bush ran the country into a ditch. You are the party of no new ideas, just vitriol and hate. The way Steele is running your party you will continue to lose seats in 2010. Lashing out on everything is a strategy? What do you stand FOR? No wonder your party continues to lose members, no one can take that much negativity. Hey, how bout another tea party? That momentum from the first one continues to build, not. Hey, new strategy to try, whatever Obama does, attack it. You guys are so original.

athensboy on May 20, 2009 at 7:19 AM

Ok HA readers, I have done a little “research” (about 10 minutes surfing the web). Here is what I found out:

The rate charged by credit card companies is about 1.75% (the interchange fee). The amount is less for debit cards but ONLY if you enter the transation as a debit transaction. Does anyone know how much less? Will there now be annual fees on debit cards?

If you have a credit card that returns 1% of the money that you spend, the card issuer and the other transaction leeches are realizing revenue of approximately 0.75%.

So, say buh-bye to that 1% cash back and say hello to either higher annual fees or interest charged at point of purchase.

johnboy on May 20, 2009 at 7:31 AM

Ohhh look athensboy learned a new word…gooper. Any moron will can figure out the self defeating nature of what is being done with credit cards bill as well as what Nobama is doing in other industries but then athensboy is not ANY moron. You jack up rates on the credit worthy to pay for the deadbeats, and the credit worthy stop using credit!

Now the banks are left with deadbeat, non-payers like athensboy! The banks go have to go back to the government because they have nothing but toxic assets on their books…hmmm, sounds a great deal like the crisis caused by the Clinton Administration and Fannie May.

Also, the goopers on the left have owned the Congress since 2006…how are Pelosi, Dodd, Rangel, Washington and Murtha working out for you? lol

PatriotPete on May 20, 2009 at 9:25 AM

What is the charge that credit cards charge businesses for their service? I had lawn equipment serviced and when I told them to put it on my charge card was informed they would add 4% to the charge since that is what they would have to pay VISA. I paid by personal check rather than add to the already large total bill. Seems the credit card companies will lose a great deal if they think they will be able to increase costs to those of us who pay promptly. Cash and checks work for me. My internet buys will also be a thing of the past.

Pat in NC on May 20, 2009 at 9:25 AM

I take offense at labeling credit card users that pay off their balances each month as deadbeats. You should see the detailed cc statements each month and see all the fees both as percentages and flat fees for each cc or debit transactions. They vary depending on the users bank and account. They generally run a little more for processing those with rewards, the merchants are paying those rewards. We have a small retail without much bargaining, and pay I the 2 to 4.5% in various fees for each sale. As a user, we put the majority of our personal expenses on our home card, and the wholesale purchases on the company card. The banks are doing just fine on the skimming they get from our $10-25m per month in transactions. We that obey the rules, and manage our lives are not deadbeats.

sannhet on May 20, 2009 at 10:55 AM

We do all of our purchasing on credit cards (1% back into a college fund), and we pay the balance in full each month. If using the credit card starts costing money, we will stop using the credit card. If using the debit card (we have one associated with the credit card, but we never use it) is going to cost us money, we won’t use it. In the past decade I can count on two hands the number of checks we have written for purchases. It looks like we are going to have to start writing checks. We were doing what benefited us most. Thanks to President Obama, we will now do what costs us least. If that doesn’t illustrate the “Change” that Obama has brought us, I don’t know what does.

dandydon on May 20, 2009 at 11:06 AM

So; The only alternative is to cancel the cards and pay them off at the old or current rate. Nobody’s a slave to these parasites!

Cybergeezer on May 20, 2009 at 12:39 PM

Oh, you haven’t experienced the worst of it until you go to the grocery store and run up a whopping $60 in staples, and suddenly discover that your Visa card has been cancelled by the bank, even though you’ve never missed a payment, and your credit is excellent.

I can’t begin to describe the anger I feel. I hope some Dem pols somewhere are watching all these comments, because they should be sweating 2010 big time. Not to mention that Deadbeat-in-Chief in the White House.

RebeccaH on May 20, 2009 at 8:36 PM

I agree with with dandydon. We pay our bill in full every month. The minute it starts costing we’re out of there.

Hot new Summer replacement show…

History Chaser on May 20, 2009 at 9:45 PM

Cash and checks work for me. My internet buys will also be a thing of the past.

Pat in NC on May 20, 2009 at 9:25 AM

That’s what Congress (the opposite of “Progress”) are not counting on: that e-commerce will irretrievable shrink once those who use their credit cards responsibly no longer choose to buy anything online, because you must use for most online transactions a credit card, of course.… E-Bay… are you listening? These are your customers – your lifeblood here! Show some outrage!

newton on May 20, 2009 at 11:37 PM

Notice that the picture shows Pelosi demonstrating her “Money Snatching Claw” for Harry.

See, Harry, yer just not putting enough effort into taking money from people who work. Ya gotta be ready with the “Money Snatching Claw”.

It’s like Tiger-Crane, for liberals.

SuperCool on May 21, 2009 at 6:07 AM

Okay now – I am no fan of Pelosi or Reid but in this instance, the bankers went a little too far. Here are some of the provisions they prevent;

1. Increasing interest rates because of credit changes, so late on 1 bill and all your other card rates get increased.
2. Predatory fees. Instead of cutting of the credit and declining a charge, they charge an exhobitant fee.
3. Teaser rates that jump up to 28% after 6 months.

What this is going to result in is prevent banks from issueing cards to people who CANT AFFORD THEM. In this instance the free market has failed and once a small number of banks started these customer unfriendly practices they all picked it up. They wrong, unethical period and cant be defended.

What this is going to do is force banks to behave responsibly, stop preying on stupid people, and provide some amount of customer service to those customers who can afford thier services.

triumphus on May 21, 2009 at 6:35 AM