Credit card companies not loved?

Who’d have thought it? Many consumers don’t particularly like their credit card companies. Newsweek reported Thursday that 78 percent of of people participating in J.D. Power and Associates’ annual customer satisfaction survey said they were considering switching.

The magazine said that now: “It seems like everyone loves to hate their credit card companies…” Some might wonder what took them so long.

Credit card offers–how to pick one

On the same day that the Newsweek story appeared, The San Francisco Chronicle carried a feature under the headline, “4 Tips for Picking the Best Credit Cards.” As the title suggests, it identified four key criteria for judging credit card offers:

1. Credit card rates
2. Annual fee
3. Credit card rewards programs
4. Convenience

The Chronicle’s analysis was excellent as far as it went, but may be a little basic for readers of index credit cards. So let’s beef it up a bit.

Credit card rates

Yes, as the Chronicle says, it’s important to carefully analyze the credit card rates on offer. You need to know whether it’s an introductory rate, and, if so, how long it will last and what the standard rate will be when it expires. You need to be aware that many companies advertise ranges of rates, and you shouldn’t suppose that you’ll be granted the lowest. And you need to be clear about whether the headline annual percentage rate (APR) applies only to purchases, and what rates will be applied to cash advances and balance transfers.

But you also need to be clear that–depending on your circumstances–you may be better off ignoring credit card rates. If you’re the sort of person who invariably pays off their balance in full each month, then it doesn’t matter if the APR is 100 percent because you would never have to pay it.

If credit card rates are important to you, you should check out the Iberiabank Visa® Classic card. At the time of writing, this has an APR that starts at 7.25 percent, which is unusually low. However, bear in mind that you only get this rate if your credit score is exceptional, and that it is a variable rate.

Annual fees

These can add up, particularly if you have a number of cards. But there are still plenty out there that have no annual fee. Blue Cash® from American Express, for example, doesn’t have one. But it still has a good rewards program.

Credit card rewards programs

Credit card rewards programs can be a minefield, and a comprehensive guide would need more space than is available here. However, here are some key guidelines:

• Make sure the issuer can’t unilaterally devalue your hard-earned points
• Avoid programs that allow points to expire unless you’re sure you can use them during their valid period
• Airline miles often only suit people with a particular lifestyle; don’t sign up for them unless you’re sure they’re good value for you
• Steer clear of programs that have high earning thresholds unless you’re sure you can meet them without incurring expense

Convenience

This isn’t much of an issue for most credit card companies, but the Chronicle suggests that you make sure yours has a good ATM network, electronic payment facilities, and round-the-clock customer service.

Other factors–including balance transfer credit cards

If you’re exploring balance transfer credit cards, then you really ought to consider the Citi® Platinum Select® MasterCard®. This card currently offers a zero percent APR introductory balance transfer rate for an exceptional 18 months. That breather from paying interest could allow you to make serious inroads into your credit card balances.

One final piece of advice–card issuers are notorious for “gotcha” clauses that are buried in the small print of credit card application forms. So take the time to understand fully what you’re signing up for. Mistakes at this point can prove expensive later.

Credit card rewards–airline miles

Among those who write about credit cards, travel reward programs are not currently flavor of the month. There are too many stories of consumers whose reward points have been suddenly devalued, or who have experienced real difficulty redeeming points on the routes and at the times they want. Many financial advice columnists point people toward cash-back cards instead.

That’s not to say travel rewards programs are a bad idea for everyone. If your lifestyle is one for which miles make sense, then by all means find the credit card rewards program that suits you best. But don’t become so obsessed by the number you’ve acquired that you avoid making a level-headed assessment of the value that you’re actually receiving.

Bonus miles

Most airlines are now inviting you to top off your bank of miles by buying more. However, The Wall Street Journal reported Friday that many of the deals on offer make little financial sense. Consumers typically buy these at about three cents a mile, and then use them to buy tickets at a redemption value of roughly half that. Not great economics.

The Journal did find examples where top-off purchase programs could deliver serious savings, but cautioned that these were relatively rare. The message? As always with deals from credit card companies and airlines, be sure to read the fine print and calculate the costs and benefits before you commit yourself.

Credit card companies–the best of the best?

Speaking of credit card companies, it’s clear that some are better than others. But which are the good ones? Well, we may have moved closer to a more definitive answer when J.D. Power and Associates unveiled its 2010 U.S. Credit Card Satisfaction Survey on Friday.

More than 8,500 credit card users responded to the survey, and the top companies scored particularly highly on:

• Credit card rewards programs
• Customer experiences when interacting with companies’ online services and call centers
• Swift and effective problem resolution

Those credit card users scored American Express best for the fourth consecutive year, giving it a total mark of 769 out of a possible thousand. Discover Card came in a close second with 757.

American Express

American Express has a broad range of credit cards and charge cards for both consumers and businesses. Blue Sky from American Express®, for example, is one of those travel rewards cards that doesn’t tie you to a particular airline, and that therefore avoids many of the issues described above. You get a point for every dollar spent, and then redeem them at a rate of 7,500 points for each $100 of travel purchases.

Meanwhile, the classic American Express® Preferred Rewards Gold Card offers generous benefits including some interesting introductory bonuses. These include 10,000 points when you spend $500 within the first three months of membership, and the waiving of the first year’s annual fee.

Discover More

The Discover® More® Card – Black is one of the best balance transfer credit cards around. It offers an introductory zero percent APR on these for 12 months, which has to be a serious bargain.

New Credit Card Rules

This Sunday, August 22, will see the implementation by the Federal Reserve of the latest set of rules to arise from the Credit CARD Act of 2009. Many credit card companies have preempted this deadline by introducing the changes in advance, but here are the new rights that you should be enjoying this time next week.

Credit Card Late Fees

At the moment, you may well be charged up to $39 if you’re late making a payment, regardless of the amount you should have sent as a minimum payment. From Sunday, late payment fees are capped at the amount of the minimum payment and cannot exceed $25 no matter how much was due (so if you should have paid $10, then that’s how much you can be charged as a late fee).

There are two exceptions to this:

• If you’ve already paid late on one or more occasions over the previous six months, the fee cap rises to $35, regardless of the minimum payment due.
• If your credit card company can prove that your lateness has cost it more than the cap (something that seems unlikely, but possible), it is entitled to charge you more.

Other Fees on Credit Cards

Two of Sunday’s other new rules also affect fees:

1. Lack of credit card use is no longer penalized because issuers aren’t able to charge inactivity fees. However, this may not prevent a company cancelling your card if you fail to use it often enough.
2. Issuers can no longer charge more than one fee for a single event or transaction that breaches your credit card terms and conditions.

Credit Card Rates

From Sunday, credit card rates can no longer be hiked without explanation. If your issuer does increase your rate, it must tell you why, and re-evaluate the increase after six months. Unless there is a good reason for it not to do so, it should then reduce the rate within 45 days.

Credit Card Regulation–Good or Bad?

The great debate about credit card regulation divides neatly along ideological lines. Some argue that the government is ill-equipped to interfere in private enterprises, and should leave the market to determine which practices are acceptable and which aren’t. Others say that the market for cards is inherently impure because few consumers can make fully informed choices when they select their cards. They contend that some issuers set out deliberately to confuse those making credit card applications, and then go on to pursue predatory lending policies.

Both sides can make compelling points, but one argument that appears not to be valid is that raised by industry lobbyists when legislators were originally considering the bill. Those lobbyists suggested that the new law might undermine companies’ business models, and force them to cut back on credit card rewards programs.

But the New York Times reported July 30 that banks’ profits from credit cards are again rising. And, a couple of weeks ago, this column quoted Andrew Davidson, a Mintel Comperemedia senior vice president, as saying that rewards have not been watered down.

Credit Card Rewards–Some Top Picks

If you’re on the look out for a particularly good credit card rewards program, these three are highly regarded by many:

• Chase Freedom Card
• Citi ForwardSM Card
• Chase Ink Bold

Credit Card Rewards Remain Robust

Remember when credit card companies were lobbying Congress to water down the bill that eventually became the Credit CARD Act of 2009? One of their arguments was that the legislation would undermine their business models so much that they’d be forced to cut back their rewards programs.

Well, the resulting credit card regulation has largely been in effect for some time now, and guess what? Credit card rewards are booming.

Credit Card Offers Take Off

Mintel, a specialist company that tracks direct marketing activity, said last Thursday that American consumers received 1.1 billion credit card offers in the mail during the second quarter of 2010. That compares with 419 million during the same period last year. And, of those mailed during the later period, 80 percent featured rewards programs.

Andrew Davidson, a Mintel Comperemedia senior vice president, commented:

It wasn’t long ago that we were speculating about the return of annual fees, the disappearance of teaser rates and the watering down of rewards programs, as card issuers attempted to maintain profits in the face of restrictive new regulations. As the dust settles on the CARD Act, we continue to see evidence that this isn’t happening.

Credit Card Rewards–Changing Trends

On Monday, the New York Times pointed out how some credit card companies are re-engineering their rewards programs. In particular, offers for credit cards that provide frequent flier miles are now coming up with some very attractive deals, including access to lounges, free bag check-in, and industrial quantities of introductory bonus miles. These can be great if you travel a lot.

However, the Times suggests that this new generosity may be a response to growing disillusionment among frequent fliers over the difficulties many encounter when redeeming miles on popular routes at busy times. This may be forcing credit card companies and their partner airlines to up their games.

Cash Back Credit Card Deals

The following day’s Times carried another article about credit cards, and this one quoted an industry expert who said that many may be better off with a cash back card than a frequent flier one. His reason? Airlines seem more ready to tinker with their programs. The expert went on to say, “With cash back there’s much less risk of the redemption level changing before you redeem your reward.”

If you’d prefer to take the safer route, here are three cash back credit card deals that are well worth exploring further. None of them has an annual fee.

Blue Cash® from American Express–This could appeal to big spenders because there are no limits on the rewards you can earn. It offers up to five percent cash back at supermarkets, gas stations, and drugstores. And, when you spend more that $6,500 on the card, you can boost your earnings so that you get 1.25 percent for all other purchases.

Chase Freedom Card–Spend $799 in purchases on your card within three months of receiving it, and you can receive a $100 cash back bonus. With normal use, you can get a huge five percent on many popular purchases and one percent on everything else.

Discover® More® Card – $50 Cashback Bonus®–This is a good card if you sometimes carry balances forward. It has a zero percent introductory APR for the first year, and then a competitive rate after that. Like the Chase Freedom card, you get a full five percent cash back on some purchases and one percent on everything else you buy with it.

Credit Card Rewards: Reverse Robin Hood?

Robin Hood used to steal from the rich in order to give to the poor. Now a public policy discussion paper from the Federal Reserve Bank of Boston gets close to suggesting that credit card rewards programs achieve much the same–except in reverse.

The paper, published last Wednesday, says: “On average, each cash-using household pays $151 to card-using households and each card-using household receives $1,482 from cash users every year.” And it goes on to show that it’s low-income households that tend to use cash and high-income families who receive most through using their credit cards.

Credit Card Companies and Swipe Fees

The Fed’s hypothesis is based on how “interchange fees” (also known as “merchant fees” and “swipe fees”) are levied and funded. These interchange fees are the cut of the transaction value paid by merchants to credit card companies every time a card is swiped. And the paper’s authors argue that merchants pass the fees to all customers in the form of higher prices. They contend:

This retail price markup for all consumers results in credit-card-paying consumers being subsidized by consumers who do not pay with credit cards… cash buyers must pay higher retail prices to cover merchants’ costs associated with the credit cards’ merchant fees. Because these fees are used to pay for rewards given to credit card users, and since cash users do not receive rewards, cash users also finance part of the rewards given to credit card users.

Credit Card Rewards and You

Whether or not you believe the swipe fees system is fair, it is the system. Government can yet change it (it’s been on the agenda for some while), but, in the meantime, there seems little point in your denying yourself the benefits that a good rewards program can bring. So here are three cards that could be of interest:

• Chase Sapphire Card. This card has no annual fee and a generous rewards program that gives you 10,000 Bonus Points after your first purchase. You also get double points on all airfare purchases booked through Ultimate Rewards. And there are no blackout dates, earning caps, or point expiration periods.
• Chase Freedom Card. This card, too has no annual fee. You can earn $100 Bonus Cash Back if you spend $799 on purchases in the first three months you have the card. And there’s five percent cash back on some popular categories and a full one percent on everything else.
• Iberiabank Visa® Platinum. This could be the card for you if you sometimes carry forward a balance, because its rates can be as low as 9.25% APR. You earn a bonus point for every dollar in qualifying purchases, which you can redeem as hotel, gift, or experience rewards. No annual fee with this one either.

Credit Card Use Overseas

On Monday, this blog mentioned the difficulties that some Americans experience when trying to use a U.S.-issued credit card overseas because so many other countries have dumped swipe-and-sign cards in favor of chip-and-pin ones. As the latter’s name implies, these cards have replaced the magnetic strip so familiar over here with a microchip. Some retailers and virtually all automated payment machines can no longer handle American cards. The exception is ATMs, which should still work.

The Kansas City Star addressed this issue Wednesday, and suggested that it may be possible in some countries for tourists and business travelers to obtain–possibly from their hotels–a prepaid card. The card is loaded with euros and contains a chip, which could solve this problem. Why not ask your concierge or check when you book your room?

It’s not yet clear whether American credit card companies are likely to adopt chip-and-pin technologies. A payments risk analyst at the Atlanta Fed wrote a blog earlier this week that suggested that fraud would be cut significantly were they to do so, but also quoted one industry estimate of the likely cost–$8.6 billion. That’s a big investment, although making credit card use easier and safer would be a valuable prize.

Credit Card Trends: “Lies, Damned Lies, and Statistics”

Writers often have odd lives, which may explain why last Thursday afternoon this one was listening online to a business program being broadcast by the London Broadcasting Company (LBC). That’s London, England. You see? Odd.

An analyst was being interviewed down-the-line from New York, and he was discussing that day’s American financial news. He was particularly enthusiastic about the latest figures from the Federal Reserve about consumer credit in general and credit card debt in particular.

The Fed, he correctly said, had reported that Americans had reduced their credit card balances by $7.4 billion in May, which was an annualized rate of 10.5 percent. He then went on to comment that this was proof of a new prudence and resilience among consumers. You are lucky (although you may not think so) to be reading this column, because his remarks very nearly resulted in the computer on which it is being written exiting a first floor window at speed.

Credit Card Debt–The Reality

The analyst could also have told LBC’s listeners that the Fed’s G.19 Consumer Credit Report shows that credit card debt fell by $19.5 billion in the first quarter of this year. However, he is unlikely to have celebrated the fact that only $800 million of that was a result of Americans paying down their balances. According to the Federal Deposit Insurance Corporation (FDIC), the other $18.7 billion was written off (”charged off” in industry jargon) by credit card companies because they’d given up hope of collecting the debts.

Cheerful headlines reporting some other credit card trends need to be taken with similarly large pinches of salt. Over the last couple of weeks, S&P, Fitch Ratings, and the American Bankers Association have all published data that show declines in card delinquencies (overdue accounts), and these have largely been covered in the media uncritically.

However, some analysts believe that these figures are partly a result of all those charge offs. Because they’ve already eliminated so many of the long-term unemployed and uncreditworthy from their customer bases, credit card companies are left with a greater proportion of cardholders who have had healthy credit reports all along. Other experts think that struggling consumers are prioritizing making minimum payments over everything else (including their mortgages) because they see maintaining the line of credit that their credit cards provide as an overwhelming need. They may not be able to keep that up for ever.

Some Good News

All of this doesn’t mean that there are no signs of Americans tightening their belts and being more financially responsible. The Discover® U.S. Spending Monitor, published July 7, showed that consumer spending intentions dropped two points in June. Unfortunately, much of that was due to a fall in economic confidence.

Of course, after all that gloom, it’s important to recognize that life remains more than comfortable for the huge majority of Americans. Indeed, with so many refinancing at record-low mortgage rates, a large section of the population has never had it so good. And if you still have a pristine credit report, you should regularly review the credit cards in your wallet to make sure you’re still getting the best possible deals.

Discover Great Credit Card Deals?

For no better reason than that the company’s name has already come up, let’s look at a couple of offerings from Discover.

The Discover® More® Card – Black has no annual fee, and is currently offering a zero percent introductory annual percentage rate (APR) for the first nine months. After that, the rate will be between 11.99 percent and 20.99 percent, depending on your credit report. This card’s strength is in its rewards program. You get one percent cash back on everything, five percent on purchases made in particular categories that change through the year, and up to a huge 20 percent on certain purchases made through the Discover online shopping website.

While you’re exploring the range, check out the Discover® American Flag Card. Yes, it offers a good deal to the right sort of cardholder, but it would also look just so good in any pocketbook!

Credit Card Rewards that Make You Work

Susan Stellin wrote a heart-felt piece in the New York Times last week. She’d been a loyal user of an airline-branded credit card for some time, but had become increasingly frustrated by the growing number of hoops she was having to jump through in order to redeem her miles. So she changed credit cards.

She wasn’t alone with her problem. Many frequent fliers have found that being tied to their chosen airline has its drawbacks, especially as many fleets practise “capacity control,” which limits the number of “free” seats available on any given flight. This can make booking a trip on a popular route at a convenient time challenging.

Of course, this isn’t to say that everyone should trade in their airline-branded credit cards. If your flying habits mean that your existing card works for you, then by all means stick with it. And remember that many carriers’ cards offer other benefits (access to lounges, upgrades, no-cost insurance, a free checked bag…) that you should factor into the equation.

Credit Scores Can Be Affected

Another reason to think twice before changing a credit card is the impact it could have on your credit score. According to FICO®, the people behind the most widely used credit scoring system, your score could be damaged if you apply for too much new credit or open too many new accounts in quick succession.

Of course, one new credit card application is unlikely to be much of a problem. There’s a second reason to take care when changing cards. Credit scores are sensitive to the proportion of your available credit that you actually use. And, if you trade in a card with a $20,000 limit for one that offers $10,000, your “credit utilization ratio” can suffer.

To be clear, none of this should stop most people from changing cards, and you should only consider not doing so if you’ve recently made a number of other credit applications and/or are using a large proportion of your available credit.

Travel Credit Card Rewards That Really Reward

Susan Stellin’s Times feature mentioned a number of travel related credit card rewards programs that are particularly hot at the moment. Here are a couple of her tips.

The Starwood Preferred Guest® Credit Card from American Express has won a number of awards recently, including Flyertalk.com’s “Best Travel Card in the Americas.” And it’s certainly the sort of deal that could suit many people. You can redeem points for free nights at 940+ Starwood hotels and resorts in 93 countries, or for flights on hundreds of airlines. And the card’s website claims that there are no blackout dates. There’s also a corporate version of the card, the Starwood Preferred Guest® Business Credit Card from American Express OPEN.

The Times also mentions the Chase Sapphire Card. You get a point for every dollar you spend on the card, which you can redeem for travel on any airline–or you can opt for gift cards, merchandise, cash back, and so on. And there’s no annual fee.

It takes a little effort to track down the card that best matches your lifestyle and needs. But failing to do so can cost you dearly–in stress as well as dollars.

The Good Credit Card News

It’s Independence Day so let’s celebrate the fact that today Americans are less dependent on credit card debt than they have been for a very long time. A quick trip to the Federal Reserve’s website reveals the latest figures. In 2008, revolving credit balances (which are mostly made up of credit card debt) averaged $958.1 billion. In April 2010, that figure was down to $838 billion.

Wow. That’s a reduction of more that $120 billion. No wonder virtually all the big credit card companies are reporting falling levels of both delinquencies (overdue accounts) and charge offs (debt written off because it’s uncollectible).

If you’re feeling in a fragile frame of mind, and simply aren’t up to dealing with bad news, then stop reading now. Because reality is about to intrude.

The Bad Credit Card News

The bad credit card news is that all that good credit card news was plain wrong. Yes, balances are down by $120 billion, but most of that is likely to be because card issuers have written off huge amounts of debt. And that money has fallen off the Fed’s revolving credit figures and into the laps of collection agencies.

Worse, as the Wall Street Journal pointed out Saturday, the reason credit card companies are reporting better delinquency and charge-off rates is because: “Some people have been unemployed so long they have simply been washed out of the credit system and no longer have any effect on the numbers.”

Credit Card Users Face Harsh Penalties

Things can be pretty tough too for those who remain credit card users. MarketWatch revealed last week the results of a survey that suggests too many card issuers retain what it calls a “gotcha” attitude to penalty interest rates.

As if credit card rates aren’t high enough already, many companies impose substantial hikes on those who are even a little late in making a payment. And the survey shows that some issuers use language to explain their penalty programs that is at best unclear, and at worse could be seen as deliberately obfuscating.

Chasing Good Credit Card Deals

When it comes to explaining penalty credit card rates, none of the major issuers scored perfectly in the survey, but one that did better than most was Chase. So, if you prefer to deal with a company that strives for clarity in its dealings you could do worse than explore some of its products.

For example, the Chase Freedom Card offers one percent earnings on all purchases. And you can earn five percent when you buy within certain categories (these change regularly), and an amazing 20 percent on online purchases made through specified merchants.

Meanwhile, if you’re seeking a balance transfer credit card, you should check out Slate from Chase. This card offers a zero percent introductory APR on balance transfers, and some nifty tools that could help you meet your credit card debt reduction goals.

And, finally, the Chase Sapphire Preferred Card could be for you if you particularly value travel rewards. And, right now, you could earn 25,000 bonus points if you spend $3,000 on the card during the first three months that you have it.

Click the links for details, terms, and conditions.

Credit Scores–an Important Change

Wednesday, the House approved the new financial regulatory bill that came out of conference last week. Assuming the Senate also votes it through, a whole new wave of credit card regulation should soon be taking effect.

The bill, of course, covers much more than just credit cards, and one small corner of it contains an important change concerning credit scores. If the legislation is passed, anyone who is turned down for any form of credit, or who receives a less attractive deal (for example, by being offered worse mortgage, loan, or credit card rates), because of a poor credit score should be able to legally demand to see that score.

In fact, there’s nothing to stop you from asking for your credit score even if a loan or credit card application is approved, and you like the deal you’ve been offered. The lender may not be legally obliged to provide it, but many may be happy to oblige.

Credit Reports and Scores–Why They’re Critical

Of course, someone’s credit score and report are likely to determine how good a deal (if any) that person can get on mortgages, loans, and credit cards. But they can be even more important than that.

Yesterday, an Oregon law came into force that stops employers in the state from using credit scores and reports as a factor in any decision to hire, suspend, demote, or fire an employee unless the company can show that the score is directly relevant to the job in question. The law addressed a nationwide problem–some employers routinely (and often unfairly) use credit histories as a way of filtering job applicants and punishing existing employees.

And the situation could become even more critical over here if the U.S. government picks up on an experiment that the British are currently undertaking. The U.K. government has, according to this morning’s Independent, asked a credit bureau to use credit histories to determine whether those in receipt of means-tested state benefits are living an appropriate lifestyle. So, for example, a person who receives housing benefits (has their rent paid) and also has a cable or satellite television subscription could be flagged as someone who may have more resources than they’re declaring, and might thus be cheating the system.

Problems with Credit Reports and Scores

Campaigners in the UK and consumer advocates over here point to the fact that all too many credit reports contain material inaccuracies. John Watts, of the Watts Law Group of Birmingham, AL, said last week that he has recently had several clients whose credit reports contained false information.

Mr. Watts, an attorney with a specialization in debt matters, advises that anyone in a similar position should immediately write to the credit reporting agency–copying the creditor that supplied the information–informing the creditor that the entry is wrong, and giving detailed, precise, and specific reasons in support of that assertion. He goes on:

And if they don’t treat you right? Well, then if you sue them they will be in a position where a judge and jury will be wondering why they mistreated you after you gave them detailed information to show that the company was wrong. In other words – after your precise warning/dispute/request to them.

Making the Most of Stellar Credit Scores

If you’ve been clever enough–or lucky enough–to have kept your credit score at the very top end of the scale, then you should take advantage of your privileged position. Many American Express charge cards and credit cards offer exceptionally good deals for those with exceptionally good credit reports.

And Simmons Bank similarly specializes in catering to the needs of the financially secure. The Simmons Bank Platinum Visa card, for example, currently has a 7.25% variable rate, no annual fee, no balance transfer fee, free travel accident coverage, and free car rental loss/damage waiver.

Low credit card rates are a hallmark of Simmons products, and the Simmons First Visa Platinum Travel Rewards card has a 9.25% variable rate. It has many of the same characteristics as the Platinum Visa card, but also has a credit card rewards program that offers one point a dollar. You can redeem points for free travel on all U.S. airlines.

Credit Card Regulation–New Proposals a Step Nearer

Representatives of the Senate and House pulled an all-nighter on Thursday/Friday to resolve their remaining issues with the Dodd-Frank Wall Street Reform and Consumer Protection Act, which includes a number of credit card regulation provisions. It is now hoped that the bill will reach the President’s desk for signature early next month.

In a statement issued yesterday, the House Committee on Financial Services sought to justify the new measures, saying:

We must restore responsibility and accountability in our financial system to give Americans confidence that there is a system in place that works for and protects them. We must create a sound foundation to grow the economy and create jobs.

Credit Card Companies Relieved

However, it is still unclear just how effective the legislation will ultimately prove. One commentator called it a 2,000 page memo to federal regulators that only empowers–rather than requires–them to act. And, earlier this month, Elizabeth Warren, a Harvard professor and Congressional Oversight Panel chair, told Fox Business that the consumer protection elements of the new law will only work properly if those who head up the regulators are prepared–as some of their predecessors haven’t been–to side with the public against powerful financial institutions.

Credit card companies and other financial institutions were happy that the regulations were less tough than some had predicted. On Friday, the Associated Press reported, “Bank stocks soared as investors appeared relieved that the rules were not as strict as they’d feared.”

Credit Card Use Protections

According to yesterday’s House Committee on Financial Services statement, among many other things, the bill:

Creates a new independent watchdog, housed at the Federal Reserve, with the authority to ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards, and other financial products, and protect them from hidden fees, abusive terms, and deceptive practices.

However, just how valuable the new law’s protections for credit card users will turn out to be is likely to depend entirely on whether that watchdog learns how to bark–and bite. Credit card companies, with their armies of lawyers, are notoriously adept at finding loopholes in regulations and it would take a nimble and tenacious canine to contain them.

Credit Card Rewards Still at Risk

Although the new bill does not seek to regulate “interchange” or “swipe” fees (the cut credit card companies and payment networks take from every merchant credit card transaction) on credit cards, it does do so on debit cards. And, as many credit card companies are also banks, that may well mean some juggling of revenues and cutting back on some credit card rewards programs.

More on Credit Card Rewards

One person who already has issues with his card’s rewards program is Adam Lasnik, who’s a web master and program manager for Google. In his personal blog, which was picked up by Payment News, Mr. Lasnik complained not about the actual rewards he was receiving, but about his card issuers’ marketing. When one of his Chase credit cards was upgraded to the company’s Ultimate Rewards program, he received a glossy brochure containing 23 pages of information that could have been summed up in a very few paragraphs. He said: “I’d rather Chase, oh, I don’t know, cut out the lame marketing, saved a bunch of money on postage and stopped filling our landfills with stupidly wasteful mailings.”

Mr. Lasnik’s Chase card offers one percent cash back and no annual fee, which, he acknowledged, is pretty generous. The Discover® Motiva(SM) Card also has no annual fee and offers up to one percent cash back, but additionally has a deal on rates. Every time your payments are on time for six consecutive months, you qualify to have one month’s interest refunded. That could be useful if you carry over balances.

Similarly, Costco members pay no annual fee on the True Earnings(R) Card from Costco and American Express, which has an exceptional cash-back program–three percent cash back on gas and restaurant purchases, two percent on travel purchases, and one percent everywhere else. And you even receive a $25 statement credit after you make your first purchase on the card. Check it out.