Fallout: The Financial Crisis

Got good credit? You might be dinged

Jeremy Hobson May 19, 2009
HTML EMBED:
COPY
Fallout: The Financial Crisis

Got good credit? You might be dinged

Jeremy Hobson May 19, 2009
HTML EMBED:
COPY

TEXT OF STORY

Kai Ryssdal: The legislation that will almost certainly impact your relationship with your credit card company passed the Senate today. It’s already cleared the House, so the president could sign it by the end of the week. It would force credit card companies to go easy on borrowers who have trouble paying their bills. But those protections for troubled borrowers could mean bad news for people who pay their bills on time. Marketplace’s Jeremy Hobson reports now from New York.


JEREMY HOBSON: The American Bankers Association says the legislation could send the credit-card industry back 20 years, when everyone paid an annual fee and even those with good credit paid a high interest rate on their debt. David Robertson publishes the credit-card trade journal the Nilson Report. He says it’s probably more like 30 years.

DAVID ROBERTSON: We’re going to start seeing a drop in the number of credit cards in the United States, and we’ll start seeing some different kinds of loyalties firm up.

Robertson says new fees of about $30 a year will push many consumers to regional financial institutions for credit cards, places that have many relationships with their customers — from mortgages to checking accounts.

ROBERTSON: They’re making money from you in a variety of different ways, and therefore they don’t have to get as fat, if you will, from you as a bank that’s issuing a credit card to you and that’s the only relationship that they have with you.

Not everyone thinks today’s Senate action will lead to fewer credit cards. Chris Ambruster is a research analyst at Al Frank, a fund that invests in credit-card companies.

CHRIS AMBRUSTER: As consumers feel more comfortable using these credit cards, more comfortable with the fee structures, as they become more transparent, I think generally there will be a larger amount of money that is flowing through these credit cards.

Right now, most annual fee payers are at the high end and are rewarded with perks like airline miles. Ambruster says companies will likely offer those kinds of enticements as they fight for consumers.

In New York, I’m Jeremy Hobson for Marketplace.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.  

Need some Econ 101?

Our new Marketplace Crash Course is here to help. Sign-up for free, learn at your own pace.