The Credit Card Act and You

On February 22, 2010, America will feel the full affects of the Credit Card Accountability Responsibility and Disclosure Act of 2009 that, on May 22nd, 2009, President Obama signed into law.  The president said the new law would, “protect consumers from getting ripped off by credit card companies.”  The goal of this piece of legislation was to protect credit card holders from being taken advantage of by the credit card companies by requiring advanced notice of rate hikes and other changes, put a stop to surprise over-the-limit fees and many more things as outlined by credit.com.  On the surface, this all seems simple enough.  Hey, I certainly don’t like seeing Americans being taken advantage of and falling farther and farther into debt.  It seems like a pretty nice set up.  After all, it passed the Senate by the overwhelming margin of 90 to 5!  This MUST be the answer to our prayers, right?

Not so fast…

While there are a lot of good things in this bill, let’s not lose sight of what it is trying to do.  It’s the same thing that every bill we’ve seen this year has tried to do and that’s put regulations on a free-market system.  Nick Bourke, a credit card analyst for the Pew Charitable Trusts, said that the bill, “did a good job addressing some fundamental problems, but it was not a silver bullet.”  The reason why is that there is one, and only one, “silver bullet” to fixing this and a slew of other problems in this country, but I’ll get to that at the end of the post; for now, back to the credit card issue.

Remember the credit card industry, just like all other industries, operates in our capitalistic, free-market system.  Because of this these companies are allowed to compete with one-another, fairly free of federal intervention, in order to win customers and stay in business.  Despite the negative aspects of credit card companies (and credit cards in general I guess) this free-market competition has yielded some pretty awesome stuff.  How many of you get some sort of bonus for using your card?  Do you get free airline miles?  How about cash back offers?  Do you get entered into drawings for vacations and prizes and the like?  Well, all of those things come about because of open competition.  In order to win your business, these companies participate in the never ending game of one-ups-manship to get you to sign up for one of their cards.  It’s the principle that is at the core of our great system, companies compete so that everyone wins.

Now we have the government stepping in and enforcing this new list of rules on these companies.  While no one likes fees and the like, remember that they are a way that these companies make money.  This money is what they use to create all those fun bonuses that you like so much.  Therefore we can probably start off by kissing a lot of those incentives goodbye.  Other than cutbacks on bonuses, these companies are going to have to keep making money somehow.  Therefore, we can expect to see several new fees and restrictions that will bypass the new laws and hit Americans straight in the wallet.

Expect to start seeing fees for things you’ve not seen before.  How does an annual fee just to keep the card sound?  How about a fee if you just let your card sit in your wallet and never use it?  These things sound pretty detestable but they are the kind of backlashes we can expect once these companies are forced to work around a stricter set of guidelines.  It’s like trying to stop a stream by throwing a big rock in it.  The stream is just going to make a new path.  The only way to fully regulate an entity is to have it government controlled, and we all know the nightmare that that scenario leads to.

Before we wrap up I promised I’d mention what will fix this problem.  If you are a regular reader then I’m sure you’ve already figured out what I’m going to say but, for the rest of you, here’s the answer.  What can stop the credit card companies from taking advantage of Americans?

Americans themselves!

Remember our Constitution and how it grants the greatest of all powers to the individual?  The founding fathers set it up that way because they knew that only people, not governments, can ever truly make a difference.  What it’s going to take for you the American citizen is to start voting with your wallet.  Become a more active participant in the system and always know EXACTLY who you are doing business with.  Nick Bourke said that, “It makes sense to read everything and speak up,” and he’s right!  Don’t just throw your credit card statements away, READ THEM!  Know what’s going on and complain if you don’t like it.  Often times these companies are able to make all kinds of changes because their customers aren’t even paying attention.  Don’t just sit idly by as someone takes advantage of you.  This kind of mindset applies, not just to this situation, but EVERYTHING you spend money one.  Blow the whistle when you see scamming going on and don’t do business with anyone who mistreats you.  Remember, you are ALWAYS voting with your wallet whether you realize it or not.

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