Credit-Card Law May Reduce U.S. Consumers' Purchasing Power by $90 Billion

[marmar]

Credit-Card Consumer Protection Law May Reduce Purchasing Power
By Alexis Leondis


May 22 (Bloomberg) -- Jack Krupansky declared bankruptcy three and a half years ago. Now he worries the credit-card legislation Congress passed this week will make his banks, including Barclays Plc, penalize him as a riskier borrower.

“This legislation could boomerang and hurt the same people it’s designed to help during the credit crunch,” said Krupansky, 55, a freelance software developer in New York.

The “bill of rights” that U.S. President Barack Obama signed today is intended to protect cardholders from excessive fees and last-minute contract changes. It also may prompt banks to slash available credit by as much as $90 billion to avoid risk, said Robert Hammer, chief executive officer of R.K. Hammer Investment Bankers, an adviser to card companies.

That reduction could choke off a consumer-led recovery and hurt retailers struggling amid the longest recession since the 1930s, said Andrew Caplin, an economics professor at New York University. Consumer spending accounts for 70 percent of the U.S. economy.

“The bill may stop various forms of abuse, but it will also stop some various forms of credit,” Caplin said. “If the economic recovery is going to rely on consumer spending, it will be a long wait.”

In 2007, purchase volume on all U.S. consumer and commercial credit cards equaled $2.11 trillion, up 8.4 percent from 2006, according to the Nilson Report, the Carpinteria, California-based newsletter. ..........(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20603037&sid=agJlp.3pO4Tk&refer=home

[mike_c]

1. good....

The "credit economy" is an unsustainable scam. The more people who live outside of it, and within their actual means, the better.

[targetpractice]

10. Agreed...

Increasingly easy credit has been the substitute for higher wages in this country for decades... ONLY because it makes the rich richer.

A renewed consumer economy driven by wage increases (not easy credit) is my hope for reform.

However, I now see salary cuts, unemployment, and restricted lending... What kind of of recovery is the media talking about?

[DBoon]

11. easy credit has also been a substitute for social benefits

Housing, health care, higher education are all financed by private credit in this country

Instead of social benefits financed by taxes, we have "borrow and bankruptcy"

[targetpractice]

13. Yup...

I'm embarrassed to admit how long it's taken me to understand that.

[Deja Q]

19. ***THANK YOU***

:yourock::yourock::yourock::yourock::yourock::yourock::yourock::yourock::yourock::yourock:

The last 4 decades or so has shown a drop in purchasing and saving power, not to mention the cost of necessities needed to obtain jobs that pay decent wages, many of which are continuing to be offshored.

[Deja Q]

18. The minimum wage also had more buying power 40 years ago too.

[Hannah Bell]

41. exactly. people didn't start taking out more credit for no reason; they

started taking out more credit as their buying power eroded & they were encouraged to.

ironic to see dems cheering as the working class loses purchasing power & options.

[TheWatcher]

59. Could Not Agree More.

[stray cat]

2. Many things in life are not as straight forward absolutely good or bad

The regulations are a good thing which may impair cash flow and penalize those who pay off their cards every month.

[Toucano]

7. What component of the law penalizes people who pay off their cards each month?

I didn't see that part.

[Demobrat]

17. They're going to start charging annual fees

and interest as soon as a purchase is made. So that people who pay their cards off every month will no longer be able to avoid paying any interest. If you're a convenience user who runs purchases through the card in order to collect points and pays off the balance every month, the only money the cc companies make off of you now is the percentage of every purchase they collect from the merchant. But that's over.

[Toucano]

23. I see.

Aren't award programs, grace periods, and annual fees really just marketing incentives that the banks use to compete among themselves?

Does the reform law say that the must charge an annual fee or prohibit award programs?

If not, I think we will continue to see these features employed as incentives to get consumers to choose one card product over another because, as you indicate, there is money to be made each time you go to your wallet and swipe a card.

These benefits may contract for a time, but unless they are prohibited, I imagine they will reemerge at some point.

[Demobrat]

25. I think what will happen is

the credit card companies will squeeze these "deadbeat" customers as hard as they can at first to see what they can get away with. Then if enough customers cancel their cards or just stop using them the CC companies will start offering them incentives again.

No, the law doesn't say they have to charge anything. But if they can no longer rip off their subprime customers they have to make up the difference somewhere.

[Toucano]

26. One point I disagree with is "they have to make up the difference somewhere¨

That's the argument that is used to encourage all deregulation, actually.

It seems to me that they could also simply enjoy less enormous profit.

Still profit. Still enormous profit. Just less enormous profit.

The measures of protection and discipline will benefit them, I think. In the long run, responsible lending practices are more profitable than irresponsible, predatory ones.

[Demobrat]

28. I should have used the sarcasm smiley.

Or at least made it clear that I was referring to their argument, not making one of my own.

[Toucano]

60. Understood

Sorry to be obtuse. ;)

[Telly Savalas]

61. If they have the capacity to squeeze the "deadbeat" customers

they'd be doing it already, wouldn't they?

[Demobrat]

71. Well they're not doing it already, so obviously

the answer is no. Currently the CC companies compete for the deadbeats, because they make money off of their transactions even if they don't pay interest or fees. And because there's always a chance that a deadbeat will become a good, interest-paying customer once their intro rate runs out or they run their balance up too high to pay it off all at once.

[Telly Savalas]

76. You're jumping to conclusions.

If they are currently competing for the deadbeats, why won't they continue to compete for the deadbeats after the provisions of the credit card bill go into effect?

The conditions you list that make deadbeats desirable customers don't change with the credit card bill. If limitations are imposed on their ability to profit from subprime cardholders, then the deadbeats become an even more important part of their customer base and they'll be even less likely to drive them away.

[Demobrat]

78. You need to do a little more research.

The credit card companies have already said that they'll be charging the deadbeats annual fees and interest as soon as they make a purchase. You may find it counter-intuitive, but that doesn't change the facts.

[Warpy]

3. You mean purchasing power that creates DEBT

Reducing it is a good idea even though it will continue the deflationary spiral in the short term.

People are starting to relearn a very tough lesson: income can be temporary but debt is forever and creditors don't care if you're between jobs or sick.

That lesson has to be thoroughly absorbed before we can move on to a more rational economy.

(I learned that lesson many, many years ago and my only debt was a small mortgage, far less than I qualified for and now paid off)

[bridgit]

4. good

[dgibby]

5. What a crock!

Once his bankruptcy is discharged, it will be removed from his credit rating (after the appropriate waiting time, depending on the type of bankruptcy he took). In the meantime, he'll just have to do what everyone else in his situation has to do-obtain a secured credit care and start rebuilding his credit rating.

[PassingFair]

14. But, but....

he's a freelance software developer!

People who go to college should
be able to discharge all their
debts with no repercussions!

:sarcasm:

[MercutioATC]

6. So somebody who defaulted on his debts is worried that he may not be viewed as creditworthy?

Cry me a river.

[Toucano]

8. If the economy depends on people buying things and not paying for those things

then this is a win-win.

It seems like that is what is being said here, that we need people to buy things they can't pay for.

The 19 year old unemployed college student with a $5,000 credit line should not be the engine of the economy.

And believe me, banks are still going to find a way to make money.

[PSPS]

9. So what's "bad" about this?

The telling quote is this:

That reduction could choke off a consumer-led recovery and hurt retailers...

The problem with this thinking is that it perpetuates the myth that debt somehow equals wealth. What good is it to have people already saddled with crippling debt just charge up even more debt to buy things they can't afford? How about a different aproach -- an increase in wages. Then people might actually buy something they both need and can afford to pay for.

Of course, you won't see any movement in that direction, what with U-bama and his merry team of crony banksters at the helm.

[depakid]

12. The propaganda just doesn't stop, does it?

Part and parcel to the gullibility of Americans who buy into it, I gues.

[mamaleah]

15. Well maybe it will help consumers think before they buy

If you have to pay in cash, or debit direct from your checking account, you cannot exactly spend willy-nilly, now can you?

[Hannah Bell]

16. nice to see all the cheerleaders for the new middle-class austerity policy.

[mamaleah]

20. Right

Yes, some people, some....not most, certainly not all, use credit cards for everyday purchases. SOME.

Most people use credit cards for big ticket items that they could either 1) save for (what a freaking concept....delayed gratification) or 2) maybe just don't need.

If money is tight, do you really think spending money you do not have is a bright idea? Sinking into debt for a new shiny toy? A little self control is never a bad thing.

[Hannah Bell]

24. why is money "tight"? because austerity is on the ruling class agenda.

[mamaleah]

27. Living in debt is not really living

And no one is entitled to a big screen tv and HD cable.

[Hannah Bell]

29. living in debt is apparently fine for the ruling class, who can make the proles pay it off.

no one is "entitled" to multiple large estates, either.

no one is entitled to live, for that matter. it all depends on who has power, doesn't it?

[Deja Q]

34. I'd love to read any answer that person would be nice enough to provide.

I don't see that happening, however...

[Hannah Bell]

43. they don't have answers. they're the same idiots cheering the takedown

of the auto workers who supposedly "aren't worth" their wages.

these are "democrats"?

[mamaleah]

46. Hmmm...

Cheering for deepening credit card debt makes one a Democrat?

[Hannah Bell]

49. the folks here are cheering for removing access to credit & fee hikes.

just like they cheered as autoworkers wages & benefits were reduced.

they're cheering the removal of purchasing power & options from the lower & middle classes.

not only that, they're repeating the right wing memes about how these folks brought it on themselves by overspending on TVs.

[mamaleah]

57. Purchasing power

they're cheering the removal of purchasing power & options from the lower & middle classes.

So the ability to purchase things that might sink them into debt? What is the point of that? What is the point of getting in debt over your head? Just so you can say you have all the nice toys someone else has?

[Hannah Bell]

58. why do you insist that access to credit = "getting into debt over one's head"?

is a house a "toy"? a car? hospitalization for your kid?

it isn't the debt of the working class that wrecked the economy, it's the debt of the financiers, & it's their debt that's put people out of work.

according to you, if they just crawl under a log & "live within their means" - that's the virtuous course. everyone's just buying unnecessary "toys".

[Odin2005]

70. The ruling class is about to learn a painful lesson bcause of the death of the credit cash cow.

They tried to use an unsustainable credit binge to prop up consumer spending while keeping wages stagnant. Now it's gonna come flying smack into their face and they will be forced to raise wages if they don't want angry people with nooses coming after them.

[Deja Q]

33. True. But many of us who work our butss off and study hard can't get jobs.

What sayeth you, oh overlord of what you think society is, what is living? What is contributing?

No more one-line shit. From anybody. Even a token explanation should be bare minimum.

And if that happened, Rush would be boozing and rotting in the streets.

[mamaleah]

45. Sorry for the delay.

Dinnertime and bath time for the kids.

Overlord? Really? *blush* Thank you!

Seriously, why would you want to live on credit? Is there more satisfaction in buying the 60" plasma today and end up paying almost 4 times the amount if you pay the minimum payment over time? What if you lose your job? You don't pay at all, but damn them...it was your right to buy something that you needed credit for because you didn't want to wait and save?

How did we get to the point that people think they are entitled to credit? As a child, I remember my parents saving every dime to buy the smallest of things. My mother told me how they struggled to get a home loan. Credit was not just thrown all over the place. Why do we think we are any better than previous generations and somehow just by our existence we shouldn't have to save? We should just be able to get?

[Hannah Bell]

50. is there some virtue in overworking, scrimping, when there's plenty of productive

capacity & plenty of excess labor?

is there some virtue in scrimping & saving when the need to do so is artificially created, in order to reduce the wage levels & living standards of the many so the few can acquire yet more money & power?

you act like sacrifice & pain is good *in itself,* no matter what the objective conditions.

if it's so good for the soul, let the super-rich go first.

[mamaleah]

52. Sacrifice has served me well

I don't have a huge debt load as a result. We buy what we need, not just what we want. Expensive shiny toy? Save save save.

It reduces stress more than the new shiny.

[Hannah Bell]

55. so not the point. but for some folks, the view 1 foot in front of their own face is all there is.

[anigbrowl]

74. Way to be patronizing...

...but nobody is as pure a warrior in the class war as you, of course.

[Missy Vixen]

51. How about a running car?

How about medical bills? I suppose people should just save up for that necessary surgery or that emergency hospitalization.

Jesus Christ. I wish someone would explain to me what the difference is between a significant number of posters here, and those at FR. It's becoming less apparent with every passing day.

I'll explain it slowly. Again.
Wages have not kept pace with the cost of living. As a matter of fact, wages have been stagnant since the 1970's. As a result, the free flow of credit made people believe that they were getting along just fine. That credit has now been cut off. It's not those at the country club that'll be suffering. It's those driving a ten-year-old car and praying it'll keep running.

>And no one is entitled to a big screen tv and HD cable.<

God forbid that anyone should actually enjoy their lives. At all.
We have a nice television. We SAVED to get it. I'm sure that's not good enough.

In the meantime, you're typing on a computer, aren't you? Why are you entitled to a computer? Perhaps the money should have gone for another purpose, huh?

[mamaleah]

54. Medical bills.

Did my post say anything about that? No. it said that while some people have needed to use credit cards to live off, many do not.

God forbid that anyone should actually enjoy their lives. At all.
We have a nice television. We SAVED to get it. I'm sure that's not good enough.

Cut the hysterics. I have said repeatedly saving for big ticket items is the best way to go. Enjoy your life? Do you enjoy credit card bills? I don't. So I try to not incur them.



In the meantime, you're typing on a computer, aren't you? Why are you entitled to a computer? Perhaps the money should have gone for another purpose, huh?

Why yes I am typing on a computer. How very astute! it was not bought on credit though. Was I entitled to it? Nope. After bills are paid, food is purchased, money is put into savings, and tzedakah is given, money left over is saved into a another account for fun. Usually once every 6-8 months it's enough for something nice. 4 years ago that was this computer. We don't have a huge tv. We don't have cable. We do not buy to make ourselves feel better. There are far better ways to bolster your sense of self than shopping.

So you had your chance to play the hysterical. Let me. Do you think people should be just allowed to spend money they don't have? Everyone should just be given money to play with?

[Missy Vixen]

72. You're starting off with a bang, aren't you?

Hey Mamaleah, you might want to fasten your seat belt. It's going to be a bumpy ride.

>Did my post say anything about that? No. it said that while some people have needed to use credit cards to live off, many do not.<

Let's talk about the fifty million Americans now going without medical insurance for a variety of reasons, and the millions who still can't afford a doctor visit or hospitalization even with insurance. They're putting those bills on a credit card, if they're lucky enough to have them. If you don't think this contributes to the ballooning of credit card debt in this country, you may want to rethink: Fifty percent of all bankruptcy filings are due to medical bills. Fifty percent.

You might also want to bear in mind that there are a large number of people currently unable to draw unemployment (try anyone who was self-employed or in the real estate industry, for instance,) who have no job and no money. The only thing's left is the credit card. What do you think they're going to do?

>Cut the hysterics. I have said repeatedly saving for big ticket items is the best way to go. Enjoy your life? Do you enjoy credit card bills? I don't. So I try to not incur them.<

I've dealt with women before who can't win an argument with logic, so they immediately start name-calling.

I hate to break this to you, but nobody enjoys credit card bills. For those who do not make over $50K a year, an unexpected car repair, braces, medical bills, home maintenance, even the holiday season can bring expense that must be paid off over time. Again, it's tough to keep up when wages have been stagnant since the 1970's. While there will always be spendthrifts, there is a reason why savings rates have been negative in this country till three months ago, and it's the fact that the cost of living continues to spiral while our money does not have as much buying power.

>There are far better ways to bolster your sense of self than shopping.<

This comes from a woman who states that "nobody" needs a big screen television or HD cable. What if the people involved choose to spend their entertainment dollars on a nice television and cable? Is it your business? If they're paying their bills, can put a little aside and would like to have something their entire family can enjoy, what is your problem?

>So you had your chance to play the hysterical. Let me. Do you think people should be just allowed to spend money they don't have? Everyone should just be given money to play with?<

We're finding out what an entire nation full of people with limited financial resources and fixed expenses are doing right now. The vast majority would like to go back to work, rather than relying on a credit card to buy food and pay the utilities. It's unfortunate that you don't seem to realize this.

"Money to play with"? With the significant rise in interest costs for being late with even one credit card payment, only the desperate are charging anything.

You know something, Mamaleah? I'm willing to give the benefit of the doubt to just about anyone, but someone who thinks it appropriate to name call not just once but twice in the same message is not someone I'm sure I want to spend any time at all talking with. Welcome to my ignore file.

[mamaleah]

77. I'm crying so hard

Ignore list.

Hey, why not.

Although you cannot see this, enjoy your life pursuing purchases you believe you are entitled to.

[Quantess]

53. I agree with everything you have written in this thread.

Credit cards "are the devil", I was known for saying back in the late 1990s and early 2000s. Even though I don't believe in the devil, credit card companies are close enough. I have not had a credit card for years. I don't even keep one just for good credit, not even to get a hotel room. Somehow, I have managed to get by without one. I have a feeling more and more people will be eliminating credit cards from their lives. It isn't easy, but credit cards are more trouble than they are worth.

Welcome to DU, by the way. :hi:

[mamaleah]

56. Thank you

For the welcome and the reply!

I have never been able to understand how a purchase of something on credit can give you any pleasure when it has only made you a slave to a finance charge.

[Odin2005]

68. Stganating wages only helped them as long as credit was flowing freely.

Now that it's not flowing freely anymore they have the choice between raising wages or fucking themselves over as profits stagnate because people aren't buying anything. They need to relearn Henry Ford's observation that well-paid workers will have enough money to buy his cars.

[Demobrat]

80. Money is only tight compared to the last few years

when anybody and their monkey could run up $60,000 in credit card bills with no problem. We're slowly going back to the good old days when credit cards were for emergencies only. Real emergencies, like car repairs and medical bills, not nothing-to-wear-this-Saturday-night type emergencies. See, if you have a credit card with a limit less than your annual salary, and you put it in a drawer and only pull it out when necessary - voila. The credit is there when you need it. Gone are the days when you could max it out going out to dinner and just go get another one. So you'll have to really think about what is worth going into debt for. You can do that, I'm sure.

[mike_c]

22. the middle class has been sustained by rising debt...

...debt that many in the middle class have interpreted as a rising standard of living. That's just absurd. The result is more than just an "austerity program." It's a crash, and not an undeserved one, IMO.

Just for fair disclosure, I did it voluntarily years ago, cutting up the cards and living within my means, which are modest. But so, it turns out, are my actual needs.

[Hannah Bell]

30. "not undeserved"? good to know whose side dems are on. all for the masters,

the proles must be satisfied with their crust, 10% unemployment, stolen pensions & bankrupting health "care," as befits the servile.

[mike_c]

44. oh for pete's sake....

Hyperbole much? The credit economy ENRICHES those masters at our expense. Is that what you want? The crusts they toss us while we keep them rich? Life as debt slaves is better than risking alternatives?

[Hannah Bell]

47. given the choice of having the credit option or not having it, i prefer having the option.

& i fail to see how removing it from half the population & jacking up rates on the rest makes us richer or them poorer.

the folks in this thread are pretty much acting like half the population went out & bought 7 wide screen tvs on credit, thereby bankrupting the economy with their inability to pay up.

in fact, it was the financiers & banksters who overextended themselves, & are making everyone else pay.

[anigbrowl]

75. removing it from half the population?

the article in the OP says credit may tighten by $90 billion, while total credit spending is about $2.1 trillion. So that's about 4.5%. This is tough if you have no credit, but on the other hand I don't think I'm alone in having decided not to give any more to the bank and paying off and cutting up my cards. It wouldn't surprise me in the last if $90 billion is the same as or close to the amount that demand for consumer credit has dropped, and the article in the OP is just a polite paraphrase of changing economic conditions rather than a unilateral decision on the part of the CC issuers.

[Odin2005]

67. Not buying big-ass TVs via credit card is "austerity"?

And when the Rich fuckers realize the credit cash cow is dead they may realize that they have to raise people's wages.

[MasonJar]

21. Good, maybe we can concentrate on something besides spending

and work ourselves out of debt.

[Greyhound]

31. The only sustainable recovery will be a production led recovery.

The consumer driven recovery they want will only make things worse, as they have for 40 years, by "kicking the can down the road".

We've mortgaged our future and our children's future in an attempt to work at producing nothing, now we might mortgage our grand children's future, hoping to be dead before it collapses again. (BTW, it won't work)

[johnaries]

32. WRONG! It's basic business fundamentals.

There are 2 ways for a business to increase revenue: 1., increase the profit margin per unit or 2., increase the number of units sold.

Since the new bill limits the amount of profit that CC companies can increase per customer, obviously CC companies are going to have to find more customers. Therefore they are going to have to extend MORE credit.

[Egalitariat]

79. You're talking about profit; not revenue. And you can increase the profit margin per unit

by limiting bad loans, which are a cost. That's what the original poster is talking about.

[Waiting For Everyman]

35. So because he's afraid, give the banks anything they want?

That attitude is exactly how we lost the regulations we used to HAVE, protecting us from those predators in the first place. And this law is only one step toward restoring them. People can't even get past the first step without quaking in their boots that their CCs will be cut off? And they wonder why we have a problem? That attitude IS the problem.

That guy has a capitulation mentality, bigtime.

Let the idiot banksters go for it, and try to huff 'n' puff 'n' blow their own house down again. They'll keep screwing up their own market until they get nationalized - it's a matter of when, not if.

[malletgirl02]

36. I agree

This measure is just a small step in the way of the regulation that the finance industry badly needs. Giving credit and loans to people who were large risk was one of the reasons for the crisis we are now in.

[Swede Atlanta]

37. It's about ti.me

We need to wean ourselves off of credit as a means of living. I see people charging gas, groceries and household supplies all the time. I'll bet there isn't 1 in 10 that pay that all off each month.

As for cutting off credit to those less credit-worthy, this is probably a good thing. Easy credit is what got people into the crushing debt loads people are carrying. Once they learn to live within their means their credit scores will slowly rise and they will be deemed more credit worthy. I don't, however, for a minute discount the fact that with shrinking wages (relative to inflation), under-employment, unemployment, etc. that some of these people have had to rely on credit to survive. But I think this will cut out people purchasing big screen TVs, expensive jeans, etc. on a whim.

And as for those most credit-worthy, especially those who pay off their cards every month, the credit card industry is unlikely to cut back on credit or start imposing significant fees. These people use credit cards as a convenience and, quite honestly, a smart way of managing money. Leave the money in the bank earning whatever kind of return you can and let the credit card company finance your purchases. That is pretty smart. The banks threats are merely that, threats. Every purchase earns the credit card companies fees from merchants. They are not going to deny those who pay off every month credit or start charging them because the companies will lose the fees paid by merchants. That they will never do.

Merchants, on the other hand, should be free to offer a discount to those who pay cash. Most credit card merchant agreements prohibit this. That should also be on the table for regulation. If a customer using a credit card is going to cost the merchant more money in the form of fees, why shouldn't the merchant be allowed to offer a discount to a customer that pays cash?

[Mike 03]

38. Well, Ben Bernanke has only been warning about this for...? How many months now?

Those geniuses on the House and Senate Finance and Banking Committees told him they knew better, and here it is.

And it's about time, but we are going to hear tons of bitching and complaining as the hammer comes down on irresponsible credit card holders.

Then the moron Senators and Congresspeople are going to blame Bernanke for all of this.

It's fucking amazing.

[sniffa]

39. Won't affect my purchasing power

Don't own a CC so I'm more concerned about keeping my paycheck, which is becoming even more of a worry as we're probably having yet another lay-off coming soon.

[Mike 03]

40. When I posted that this would happen, I got lectured and instructed that I was mistaken

and that this would have no impact on the availability of credit.

[prolesunited]

42. I am not going to take the CC execs and advisers word for it

I think it's called extortion.

Give us what we want or the economy will crash.

I hope Congress calls their bluff. If they don't give anyone credit, they won't make money. Since that is their objective, I have no doubt they'll manage a profit under the parameters of this law.

[tj2001]

48. "Wall Street Regulation May Cripple Economy" - 2000 headline

Also
"In SEC Testimony, Paulson Recommended "Self-Regulation" For Wall Street"

[ColbertWatcher]

62. While the CEO's salaries remain UNTOUCHED. Fuckers ...

[surrealAmerican]

63. What a scam.

"Consumers" never actually had that "purchasing power" to begin with. Very few people run up all the debt their credit cards "allow", and those who do usually find themselves in very serious trouble.

[Telly Savalas]

64. Caplin is exagerrating the effect this will have on the economy.

Let's assume the $90 billion figure is correct. There's a difference between available credit and utilized credit. Just because I have a credit card with a $2,000 limit, it doesn't mean I'm going to go out and immediately spend $2,000. So reducing available credit by $90 billion would only reduce short term spending by a fraction of that amount.

Moreover, reducing credit card limits doesn't reduce purchasing power over the medium and long-term. If consumers buy x amount of stuff next month, then over the next few years they'll be repaying that x with interest, thereby reducing their purchasing power in the future.

[pipoman]

65. With availability of Visa/MC debit cards

I have no reason to have a credit card. The only reason I used to keep one was for online and phone orders. Further, credit card companies are for profit, they will find a way to keep their profit coming in even if it requires them to accept more risk. The fees may be a bit higher and/or interest rates but they still have to deal with competition, their overreaction will result in someone filling the vacuum.


I like my PayPal debit card for online purchases. I can transfer just enough to cover my purchase and never have to give out my real bank debit card.

[Odin2005]

66. A good thing IMO. Time to ween ourselves off the financial crack that is debt.

[sendero]

69. More bullshit propaganda..

.... what the banks want to sell you is the idea that they should loan money to people they KNOW are likely to default, and then make those who pay their bills pick up the slack when they do. As if this is somehow good for the economy.

BULLSHIT!

Every dollar that comes out of the pockets of those who pay their bills is a dollar not spent in the consumer economy.

Floating more bad debt is that LAST THING THIS ECONOMY NEEDS RIGHT NOW, EVEN IF OBAMA HAS TOTALLY EMBRACED IT IN THE FORM OF BANKER BAILOUTS.

What the banks really want is easy profits, don't fall for their BULLSHIT.

This bill is modest beyond all belief, to be effective it should have capped rates at 10% (generous) above the 10 year treasury. The bankers are being coddled and still they whine.

[regnaD kciN]

73. BULLETIN: The banks have ALREADY cut credit lines since last year's crash...

My wife was told that a card she hadn't used in years had been canceled, and my BofA card had its credit limit lowered from $22,700 to $11,300 (which, to be honest, didn't mean a lot to me, since the largest balance I ever had on it was around $175).

Banks have already been doing this since worries arose about massive credit defaults in light of the recession. Most of the majors have already gone through their accounts and pruned excess credit, even for those with good ratings. I'd be surprised if this new law (which, remember, only moves up regulations already imposed on the industry by three months) will inspire another round of the same -- more likely, you'll see another round of interest-rate hikes in advance of the restrictions on retroactive hikes taking effect. After all, banks can't live without enough "marginal" customers paying 25-30% on their balances.

[roamer65]

81. I'm already massively cutting my credit card usage.

Beating them to the punch.