August 11, 2009
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Finally, Some CC Relief, Pt.2
What do we consumers get from it?Either way this penalty is going away. One way or another, the credit card lenders are going to have to find another way to deal with over the credit limit charges. As far as us credit card consumers, why would we ever prefer to continue to pay the additional penalty? This question goes back to the original intent of the penalty in the first place. For those who can recall how it was back in the eighties, there it was not unusual to have a card bounce at a most embarrassing time. It was a welcome service for the credit card lenders to show a little and let the transaction go through and pay a meager $10 charge for that grace. That was well and good.
As time went on, however, the credit card lenders realized that this grace could be exploited for greed. As these penalties became the de-facto standard, the credit card lenders began using this convention as the rule. They quickly realized that the fee could be raised to a point of additional revenue, well beyond the cost involved in the additional risk. Not only did the fees reach the $40 mark but, other sanctions began to creep in as well. Now the card holders had no choice but to pay. Little 5% mishaps became regarded as major infractions. Finally, the government had to step in.
So, you see, the credit card lenders are actually taking a few steps back to where they were a few years ago before the greed got a hold of them. Whether this scheme will remains to be seen. The new laws will dictate what is fair and rule that the fees must be "reasonable and proportional." Just how those terms will be applied has yet to be played out. Likely, each lender will calculate where their best profit is. Either they will offer the option for consumers to pay the penalty and accept the terms the government decides is fair or else just let the penalties die off as not worth the trouble. In any case, the penalty must remain optional and cannot be imposed without consumer consent.