Credit Card Reform Act: How The Banks Are Switching Business Models

By Donald Griffith on August 2, 2010, 9:34 am

It can be argued that President Obama and Congress meant well by passing the act that reforms credit card charges. One example was the charging of higher interest rates for things originally charged at lower rates. This is all academic for the banks are used to earning a set amount on their credit cards.

Banks Will Make Up For The Losses

The banks will recoup these losses by charging good customers high rates. Those with excellent credit will still have their rates jacked up. All this when the banks are getting virtually free money from the Federal Reserve. This is already occurring.

What is coming soon is the charge for having a checking account. Usually a checking account is free if combined with other accounts. Soon this will be coming to an end. When all is said and done, the charges that good customers with excellent credit will be paying in fees are going to be higher than ever before.

The Economy Will Be Hurt

The economy will be hurt even more. After all, who is going to use charge cards as often as before when rates for good customers are approaching and surpassing 20 percent? Citibank is the prime culprit in doing this. The economy is going to be hurt more by the denying of increased credit, and decreases in credit amounts already possessed. When people are being charged higher interest rates and inconvenienced, many planned purchases will be put off.

Since the banks are the most powerful institutions, with the top banks making up two-thirds of the GDP (Gross Domestic Product), they are going to win in the end. For every step to punish them, the consumers will be the party taking the hit.

Credit Card Reform Act: How The Banks Are Switching Business Models

Banks Will Make Up For The Losses

The Economy Will Be Hurt

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