How credit card companies will remain profitable

No longer can credit card companies change due dates or hike interest rates without ample notice. Still, they’ll find ways to be profitable after the Credit Card Accountability and Disclosure Act — also known as the CARD Act — goes into effect Monday, experts say.

Wholesale changes meant to protect consumers from burdensome penalties levied by card companies will likely trigger results ranging from tougher access to credit to the rebirth of annual fees, said Ben Woolsey, director of consumer research for

“They’ll try to offset lost income,” Woolsey said. “It’s unprecedented that the government will come in and restrict the ability of [a company] to price the product the way they want to, but the fact that credit cards touch so many American households, the political pressure was so great that something had to be done.”

According to a survey conducted in late January on, 27 percent of cardholders say their card companies have increased their interest rate — up from 19 percent in June 2009. Thirteen percent have had their credit limits lowered and another 15 percent say their minimum payments have increased.

Card companies may not stop there. Consumers might more frequently see fees for  inactivity,  balance transfers and cash advances and additional fees linked to card reward programs for travel and entertainment, for example.

For now, consumers have greater protections through the Cardholders Bill of Rights.

“This is a good first step,” said expert Adam Levin. “It brings greater transparency, more fairness and creates a bit more structure. It tones down the Wild West atmosphere in the credit card world.”

Here are some of the most significant changes that go into effect on Monday:

  1. 45-day notice: Card issuers must give a 45-day notice to cardholders in advance of an interest rate change.
  2. If you opt out of card changes, you have five years to pay off your balance at the existing rate.
  3. Monthly statements must be mailed or delivered 21 days prior to the due date. Card issuers can no longer set a deadline before 5 p.m., cannot charge for online, phone or mailed payments unless it is made on the due date or the day before.
  4. Card issuers cannot issue cards to anyone under age 21 unless they have a co-signor or can prove they are able to repay debt.
  5. The pay-off period when making a minimum payment must be disclosed, along with how much would need to be paid per month to pay off the balance in 36 months.
  6. Card issuers can no longer employ double-billing.
  7. Cardholders must opt-in to be able to exceed their credit limit.

By The Numbers:

  • $1,157: Average balance per open credit card at the end of 2008.
  • 26.5 billion: Number of credit card transactions in 2008, totaling $2.1 trillion
  • $20,000: Amount of debt carried by the average college graduate.

Source:, Nilson Report, and Experian

Ask the White House: Austan Goolsbee, an economist who serves on President Barack Obama’s Council of Economic Advisors, will answer questions in a live online video broadcast town hall meeting beginning at 2 p.m. today, Feb. 22.

For the full list of CARD Act changes, visit

11 comments Add your comment

Brian J. Donovan

February 22nd, 2010
7:18 am

Read “The Need for the Comprehensive Reform of the U.S. Credit Card Industry,” available at:


February 22nd, 2010
2:13 pm

Other than business travel, we use one credit card, which carries an 11.99% finance charge. This allows us to carry the payoff no more than 90 days. Instead of paying someone to come up with “creative ways” of additional fees to continue to screw credit card holders, possibly lowering interest rates would net more cash flow for credit card companies and actually boost our sagging economy. The less we owe, the more we tend to spend.


February 22nd, 2010
2:32 pm

I agree with Catwoman. Simply putting a cap on interest rates would get rid of a lot of other unsavory practices too. I think interest rates should be capped at prime rate plus 10% (which is comparable to the 18% limit that we had so long; the prime rate is normally around 8%, although right now it’s lower). If credit card companies can’t afford to lend at that rate, they shouldn’t be lending. And — big point — what we don’t spend on interest, we can spend on other things, so it would boost the economy.


February 22nd, 2010
2:52 pm

UGAProf and Catwomen – Y’all need to learn about credit risk; how credit is sold in the secondary markets to support additional lending etc.


February 22nd, 2010
3:50 pm

The joke is that so many politicians and pundits didn’t see this coming. It shouldn’t be a big surprise that if they make companies lower revenue in one area, companies will find others ways to raise revenue that will cost consumers- in some ways worse than before. It’s Bastiat’s broken window fallacy, and 150 years later the idiots in charge still don’t get it. Actions have consequences, and when it comes to complex systems like the economy, the invisible, unforeseen consequences are typically much worse, though sometimes more subtle, than the initial problem they were trying to solve.

New Credit Card Laws | Larkin Coaching

February 22nd, 2010
4:19 pm

[...] product the way they want to,” Ben Woolsey, director of consumer research for told the Atlanta Journal-Constitution. “But the fact that credit cards touch so many American [...]


February 22nd, 2010
4:22 pm

Maybe card companys should charge an annual fee say maybe Thirty dollars on all credit cards to make profit and to lower interest rates.Thier should be some kind of law passed to keep interest rates below 18% if you pay an annual fee.

The ole ball coach

February 22nd, 2010
5:05 pm

Greed will and has killed our economy …………….. fatcats pad the politicians pockets……America as we have known it is doomed….

Flipside to Credit CARD Act |

February 22nd, 2010
6:03 pm

[...] tread lightly on credit card reform for this very reason. As Ben Woolsey of of said, “[Banks will] try to offset lost income…It’s unprecedented that the government will come [...]


February 22nd, 2010
7:30 pm

@ole ball coach
The system was only desgned to last 50years so that the boomers could lve a life of luxury at the end of WW II… Now its time to pay the piper… The Rothschlds and Rockerfellers are knocking at the door to collect their dower… America as we have known it no longer exist, wake up people, everyday more of your libertys are taken away… When we are all out in the streets cold and hungry reduced to being serfs for the JP Morgan Chases. It will be to late to do anything about it. The only reason you still have your freedom is that the Government needs more tme to figure out a way to disarm the general public…..BLESS

[...] were fearful of what credit card companies might do in response to sweeping, consumer-friendly regulations that came down the pike in [...]