May 20, 2009

Obama's Credit Card Plan

The imperial president Obama was inaugurated four months ago.

The question: Am I better off today than I was four months ago?


Another question: Is there any hope that I will be better off a year from now than I am today?


On Tuesday, Andrew Martin, the New York Times, warned that Obama's credit card plan would punish responsible card users.

Credit cards have long been a very good deal for people who pay their bills on time and in full. Even as card companies imposed punitive fees and penalties on those late with their payments, the best customers racked up cash-back rewards, frequent-flier miles and other perks in recent years.

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.”

Whether it's mortgages or credit cards or whatever, I'm sick of being PUNISHED for being responsible and having my act together.

I believe in being charitable. My household is not stingy with donations. Our total dramatically exceeds what Joe Biden and his wife give to charity, and what the Obamas gave before they had their eyes on the White House.

When it comes to spreading our wealth around, I want control. I don't want the government to determine my charitable giving.

But here we go again.

I have to bail out people that are irresponsible and living beyond their means.

I'm getting screwed.

...People who routinely pay off their credit card balances have been enjoying the equivalent of a free ride, he said, because many have not had to pay an annual fee even as they collect points for air travel and other perks.

“Despite all the terrible things that have been said, you’re making out like a bandit,” he said. “That’s a third of credit card customers, 50 million people who have gotten a great deal.”

Robert Hammer, an industry consultant, said the legislation might have the broad effect of encouraging card issuers to become ever more reliant on fees from marginal customers as well as creditworthy cardholders — “deadbeats” in industry parlance, because they generate scant fee revenue.

“They aren’t charities. They have shareholders to report to,” he said, referring to banks and credit card companies. “Whatever is left in the model to work from, they will start to maneuver.”

I played by the rules, yet I'm going to be punished.

I have to pay because other people don't have the self-control and discipline to manage their spending.

I'm sick of being tapped to clean up others' messes. I'm sick of the Obama government planning ways to seize more and more of my money, taking away my freedoms, and generally messing with my life.

Today, Ron Lieber, the New York Times, is putting a happy face on the Obama plan to screw me.

At first glance, the sweeping credit card legislation that passed the Senate on Tuesday looks like a huge victory for consumers. The bill, after all, contains relief from penalty fees and certain interest rate spikes.

But for people who pay off their bills each month, and milk the card rewards programs for everything they’re worth, there is some cause for concern.

For months now, the card companies have been threatening to cut rewards programs sharply to make up for revenue lost because of the new restrictions.

My guess, however, is that this talk is just so much saber-rattling.

Card companies want to make money, and big spenders help them do it, even if those cardholders do not go into debt.

First, let’s lay out the things we know will change because of the new legislation. The bill is chock-full of new rules, which will take effect at various points in the year after President Obama signs the final legislation.

Lieber discusses eight of the changed rules, ones that don't really impact responsible card users.

Then, he delivers the good news!

...So will credit card companies kill reward programs or drastically scale most of them back? Of course not.

“If you strip away the reward component of a credit card, it’s essentially a commodity,” said Rick Ferguson, editorial director at the loyalty marketing company LoyaltyOne. “The reward is what gives it its personality. It works from a branding perspective as well as a mechanism to influence customer behavior and consolidate spending on a particular card.”

That last part is crucial. People who spend a ton generate fees galore from merchants, and that money helps the card company stay in business. So you may soon see card companies giving away more goodies or lowering annual fees for people who hit certain spending thresholds each year. American Express already does this on a number of cards.

The NYT has done an about-face. Only the day before, Martin spread the doom and gloom message.

Now, Lieber is spreading the word that responsible card users WILL NOT have to carry the burden of those who made irresponsible choices with their credit cards.

In fact, people like me "may see card companies giving away more goodies."

This has the scent of pure propaganda.

Lieber concludes his column with another turnaround.

Also, keep in mind that you may have more control over what the card companies do to you than you may think.

If you don’t like the new fees and other things that banks will soon be testing as they grapple with their new economic reality, then make some noise. Send a note to me at, so I can write about the latest foolishness — or consumer-friendly twist. At the very least, all of our complaints to the higher-ups at the banks may help persuade the companies to head in another direction.

“Work your way up the chain,” said Dennis C. Moroney, research director for bank cards at TowerGroup, a MasterCard-owned financial services consultant. After all, it may cost less to appease you than it would to replace you.

All of a sudden, Lieber talks about "new fees and other things that banks will soon be testing." Huh?

Everything was rosy. Don't worry, be happy. Then, POW. He does a 180, back to reality. Forget Lieber's heavy duty sugarcoating.

He wants aggravated people to send him their complaints so he can try to persuade the credit card "companies to head in another direction." Sure.

Send in those complaints to Lieber. That will help.

The fact is, once again, responsible people will have to bail out the irresponsible. We will be punished because we did the right thing. We will have to carry the irresponsible on our backs.

Here's a thought: Why not hold the irresponsible responsible for their own choices?

I use credit cards as a convenience. If it costs me, I'll stop using the cards if necessary.

Kiss this customer goodbye.

The solution on the credit card matter is simple for me, but it's still disturbing to have the out of control Dems and imperial president Obama screwing up my life.

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