The credit card business as we know it is going to cease to exist. In light of the poor economy and record default and bankruptcy rates, credit card issuers are scrambling to reinvent themselves.
The first of the provisions in the credit card reform act have already been put in place. The credit card companies are now responding in kind by making major adjustments in the way they do business.
First off, we may have seen the end of fixed rate credit cards. The new reform legislation lays out strict guidelines on how the credit card companies must inform cardholders with fixed rate credit cards when their interest rates will go up.
With variable rate credit cards however, your card’s interest rate will go up automatically when the prime interest rate is raised. Credit card companies charge interest based on the prime interest rate plus percentage points.
This in effect gets around the notification provision for raising interest rates. We certainly knew that the credit card issuers would make adjustments and find loopholes and now we are seeing that come to fruition.
Because there have been so many bankruptcies and defaults the credit card companies are also greatly scaling back their rewards programs. They are also charging fees as high as 5% for a balance transfer.
It was just a few short years ago when balance transfers were all the rage as the credit card companies competed very aggressively with each other. Those days are over… at least for now anyway.