The Consumer-Creditor War

Mafia Billionaires Take the Battlefield

Earlier I hinted in a previous article about the growing number of American consumers who are paying their credit cards off in larger numbers. It appears, from this article, that now the Credit Card Mafia is going on the offensive. That’s right—many of the largest creditors in the Nation (and undoubtedly the world) are losing money because people are paying off the cards are high payment rates, despite the fact that the Fed has increased rates.

Let me explain. When the fed raises interest rates, credit card companies also charge higher rates. They add this rate adjustment to the prime rate…which is…HEY! WAKE UP! Sorry about that, I almost went into a boring interest-rate conversation. Just know that they’re worried. Look what Richard Srednicki at J.P. Morgan had to say about it:

“It is a tougher business if payment rates continue to stay up and consumers continue to pay off more. It's something we've got to understand and work at." (Emphasis Mine).

That’s right. In other words, the gloves are off and they’re ready to go to war. For once, the statistics did not predict people to continue to pay off cards in high numbers at high interest rates. Granted, Americans continue to use credit cards and are in deeper debt than ever (I have to emphasize that). But this can still be viewed as a victory (albeit a small one) for the American consumer.

Hopefully, as Americans become more informed about the true risk-reward system of the credit card, they can make more responsible choices. Many are financing their credit card debt against their homes; others are playing the balance-transfer game where they simply move their card debt to a lower interest-rate card. When the government introduced the new credit-card bill (with help form the Mafia lobbyists) that doubled the minimum-payment requirements, payment levels increased!

So those are the tools that the American consumer is using on the battlefield. So what are the credit card companies doing?

Card issuers are trying to replace lost interest revenue by increasing late-payment fees and raising interest rates for customers unable to pay their bills in full. In an effort to build customer loyalty and increase spending, issuers have launched a slew of new cards and have introduced new checkout-counter technologies to encourage more card use. (Emphasis Mine). Source is here

Apparently, multibillionaire companies come wit’ it when its time for a battle. Have you use the Paypass machine yet? If you pay off your balance off every month, are you using the best card (hopefully not with an annual fee?) It’s my hope that you’re on the lookout when it comes to using the credit card. If you are wary of how they can help (and definitely hurt) you, just be careful. Oh, and make sure your chin strap is on tight—your out against the most ruthless and well-funded adversary in the consumer industry. Meanwhile, I’ll make sure to fly over and keep reporting to you how things are going.