The bankers make it sound like a certainty: New rules limiting high credit card interest rates and other usurious practices are going to cut into bank revenues, so they'll have to make up the difference somewhere. That means fees have to rise for everybody else. It's just a truism, see, the way every action in Newtonian physics produces an equal and opposite reaction.
A front-page New York Times article (registration required) recently described some new measures banks are considering to boost sagging revenues: adding back annual fees, charging interest from the moment you make a purchase, curtailing rewards programs and raising late charges and other penalty fees. (See "The world's worst credit cards.") Credit card users who carry a balance are used to such strictures, but now the card companies hope to force them on the 50 million Americans who pay off their balances every month.
I can't wait to watch them try.
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Consumers who run up big credit card balances and take a long time to pay them off are at the mercy of their lenders, which leaves them with virtually no leverage. Despite the new rules, banks will probably still find ways to dun customers who run up debt and limit their own options. But consumers who stay out of debt get to call the shots. And they're the ones who will decide whether to pay new credit card fees. Hmm . . . I wonder what they'll choose.
Thirty or 50 years ago, captive consumers largely did what big corporations told them to do. The consumer economy was relatively new, and big companies offering glittering products and convenient services seemed benign. Many of them actually helped make people's lives better.
But that patriarchal setup ended with the advent of the Internet, which has generated intense competition for practically everything and allowed consumers to shop for the lowest price without leaving home.
Exhibit A: Airline fares
Credit card companies that think they can keep their customers while jacking up fees might want to study the airline industry, which has failed for three decades to enact meaningful fare increases -- or even make a profit. Every time one airline tries to raise fares, another carrier tries to grab market share by launching a sale. And new discount airlines pop up all the time, driving prices even lower.It's true that new fees for meals and checked bags have stuck, but consumers have reacted by bringing their own food and stuffing everything into bulging carry-ons.
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Protect your credit scoresThe new credit card law could hurt your credit unless you follow certain steps.
Exhibit B: Music downloads
Downloaded any music lately? The music industry fought a mighty battle to prevent you from doing that, because it figured it'd make more money by resisting technology and forcing you into stores to buy whole compact discs.Apple had a different idea, which actually benefited consumers. We all know who won.
Continued: The mainstream media
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The practice of raising rates because your late with a payment made on a weekend because the company doesn't take payments on those days needs to be looked at as well. The cable companies need to be next!!! The charging practices need to be addressed or the industry needs to be deregulated.
Who needs that card anyway?