Credit card companies about to get burned twice


Being in the credit card business is getting more unattractive by the day. Economists think that the consumer default rate on plastic will move up at the same rate as unemployment. In other word, figures could move over 8%.

Now the federal government is getting ready to issue a bunch of consumer-friendly rules that could cut margins at issuers. According to Reuters, "The Federal Reserve is to vote on credit card reforms that may bring some relief to customers who face a variety of ways for being hit with late fees, universal defaults, shorter payment periods and confusing payment allocations for different balances."

Is that fair to banks and other card issuers? Probably not. A lot of their customers are deadbeats who know the day that they get their cards that they will not pay-off card balances. Some people run up balances on a dozen cards knowing full well that the can't cover those sums with their current incomes. Other grifters pay for their mortgages and food for their children when they lose jobs. Why shouldn't the money go to the companies that gave them their plastic?

Credit card companies are up against a lot of canny and dishonest customers. They should be able to do whatever they want so that they can make a profit.

Douglas A. McIntyre is an editor at 247wallst.com.

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