Credit Cards–How Fox News Got It Wrong
Credit Card Trends Under Fire from Fox News
New Year’s day’s guest host on Neil Cavuto’s show was Stuart Varney. At one point he interviewed Paula Albertson, CEO of Albertson Financial Group, a firm that specializes in financial planning and retirement planning services.
Their topic was credit card trends, and Mr. Varney had his own particular views of what was already happening as a result of new regulations to further control the industry, which take effect in February.
Credit Card Terms to Favor the Irresponsible?
Perhaps the point that upset him most was the idea that those who clear their statement balances in full every month were about to be required to pay more than their fair share for credit card use. He complained that many of these “good” customers had recently seen annual fees introduced, their spending limits lowered, and their credit card rewards reduced. And, among many questions, and remarks on this point, he commented:
I think what will get people really upset is when the people with good credit, those who pay off everything at the end of the month, they never borrow anything, if they get hit, if they have to subsidize those people who borrow constantly, that will create a ruckus.
Who Is Subsidizing Whom?
But it’s those who have struggled to manage their credit card debt, to live within their credit limits, and to make payments punctually who have, for many years, been subsidizing those who are richer, and/or better at managing their finances.
In what sort of enterprise is a high-cost customer who generates zero revenue defined as “good,” while those who pay most of the companies’ bills, and make much of the profit are called “bad?” Yet that’s precisely how credit card companies work. Those who pay no interest, no fees, no charges, no penalties, but take free transaction processing, free statements, interest-free grace periods, and expensive credit card rewards programs are lauded. And yet they are the ones who are being subsidized by the less well off.
In fact, the Wall Street Journal last week quoted Robert Hammer, an industry analyst, as saying, “Credit card issuers collected $22.9 billion in penalty fees–such as those assessed for late payments–in 2009, up from $19 billion in 2008.”
It’s How It Works
Of course, there’s no point in worrying about whether or not this situation is fair. It works. At least, it has right up until recently.
But with so many Americans unemployed or in low-paid jobs, and with so much gut-wrenching financial hardship in every corner of the nation, there are simply too few poor and feckless left with the necessary resources to subsidize more responsible credit card users. And those “good” customers are likely to have to get used to paying–at least in part–their own way.
None of which means that anyone should pay more for using their cards than they have to. So it’s always a good idea to keep an eye on current credit card offers.
Disclaimer:The information in this article is believed to be accurate as of the date it was written. Please keep in mind that credit card offers change frequently. Therefore, we cannot guarantee the accuracy of the information in this article. Reasonable efforts are made to maintain accurate information. See the online credit card application for full terms and conditions on offers and rewards. Please verify all terms and conditions of any credit card prior to applying.
This content is not provided by any company mentioned in this article. Any opinions, analyses, reviews or recommendations expressed here are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any such company. CardRatings.com does not review every company or every offer available on the market.
Published (Modified )