Credit card industry to sock it to good payers


Realizing they can no longer gouge slow payers with rapid interest rate hikes and questionable fee practices once the new Federal Reserve rules take effect, possibly even sooner if the credit card reform bill passes Congress, credit card companies are looking to make up for their profit shortfall by changing the rules for good payers.

Some in the credit card industry think good payers have been getting a free ride. They pay no interest as long as they pay their credit cards in full plus get cash back rewards, frequent-flier miles and other perks. In the industry these good payers used to be known as "deadbeats" because the credit card companies didn't make much profit off them. It was the late payers who paid onerous interest rates and penalty fees that made the profit for credit card companies.

In fact a 2005 Government Accountability Office report estimated that 70% of card issuers' revenue came from interest charges and that the portion from penalty rates and fees appeared to be growing. The rest of the profits came from fees on cardholders and retailers for processing transactions. Retailers have started to protest the higher fees expected if Congress passes the credit card reform bill and pledge to pass them on to consumers.