More Post-CARD Analysis


The CARD act has only been in effect for a couple weeks, and we are still trying to digest it’s implications.    In the run up to the law’s passage, we were bombarded with terrifying scenarios explaining the supposed horrors of the post-CARD world.

Some  Post CARD Predictions

Matthew Amster-Burtonover at The Mint has taken a look at the CARD act and what it’s implications are for individual cardholders.    First, he looks at the case of the “deadbeats”, those who pay their accounts in full every month in order to avoid interest.    He concludes, “If you do show steely discipline and pay in full consistently, the card issuer is now likely to reward you by lowering your credit limit or canceling your account. Happy trails.”       I find that prediction to be as implausible as it is pessimistic.    Card issuers want customer who pay their bills on time.    They represent an extremely low risk of default while being a reliable source of transaction fees.    We know card issuers like these customers because these are the people with high credit scores who get tons of solicitations in the mail for new cards.     This prediction predates CARD, and I have seen zero post-CARD evidence that deadbeats are being dropped.

But More Reward Cards????

Next, Amster-Burtonover contradicts himself completely when he claims that there will be more reward cards offered to people with high credit scores.   He attributes this to transaction fees, a factor he neglects when making his prediction about deadbeats.    I can agree with this analysis, only because it completely contradicts his logic in regards to deadbeats.

New Fees?

He then predicts a multitude of new fees, such as annual fees, inactivity fees, and foreign exchange fees.    First, none of these fees are new.   Second, they have been rising even before the CARD act.    Finally, consumers can still find plenty of cards without those fees.    Some, but not all of my reward cards have annual fees, and I chose to keep them only because the annual fee is far less than my rewards.    I have a Capitol One card that I use out of the country specifically because there are no foreign exchange fees.   I am also a little tired of the stupid “inactivity fee” canard.    These fees are only charged when people haven’t used their card in a year, and even then the fee is less than the bank spends in postage to mail you your statement every month.     If you haven’t used your card in a year, you should either cancel the card or pay the fee if you really want that card so much.      Whatever you do, just don’t complain about it being a result of the CARD act.     I would be shocked if all the inactivity fees paid by everyone in the entire country add up to one thousandth of one percent of all the credit card interest paid.

Banks Getting Into Payday Lending

This does not surprise me.   In fact, I recall reading that many payday lenders are subsidiaries of major banks.

Opt Out of Larger Banks For Smaller Banks?

Here, the author seems to indicate that consumers will abandon their big banks for smaller banks offering simple cards.   If this is the case, it would be a welcome development.    While the big banks offer some great rewards, it is easy for many consumers to be confused by the terms and encouraged to overspend.     The Obama administration has long been an advocate for simpler financial products, like the ones being offered by credit unions.

There is a lot of misinformation and faulty predictions out there regarding the CARD act.    The Mint gets a few things right, but also makes some glaring, and contradictory errors.    As time goes by, the implications of the CARD act will eventually become clear.

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