January 06, 2009
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News: Good CC Scores, Good Rewards.
Not all is bad news for credit card holders. Those who continue to maintain good credit card ratings will continue to enjoy nice benefits. Some will become ‘less nice' as before for those who are relegated down to ‘marginal level' as the qualification bar raises. But those in the high FICO range (750+) will still enjoy the best rewards, lowest interest rates and highest spending allowances. It remains to be seen how the industry recovers from the huge deficits that will continue through next year and ‘rewards' may be affected but, the benefit of fleecing the best customers to offset the worst could back-fire (It's not the same as fleecing good employees. Customers are not as loyal). Customers go harder on things taken away then they do on things they never had. More likely, the credit card industry will seek to offset losses by reinstating Annual Fees and issuing new accounts at higher interest levels.
With all the new credit card regs coming up shortly, banks will, almost certainly be more mindful about risk. There may be fierce competition for the ‘best customers' with all kinds of rewards. The industry knows that it will become more vulnerable to bad risk and will likely cater to those who are less risky. Further promotion of risk-management and debt management programs offered by many of the large lenders now is likely. Rewards programs may be dovetailed into risk-reduction style benefits. These are things like brokerage and investment accounts. Some may even grow into tax-deferred situations toward retirement (perhaps with a pre-nuptial that defaulted credit card accounts forfeit holdings).
The race will be on for the best customers and this could prove to be the best of times for those fortunates. Segmentation will likely be more pronounced and levels may start being exclusive. All this being said, there are still more variables in the mix (threats) that could clip away at benefits. Further credit card legislation is being considered in the coming months, not the least of which is the control of ‘Interchange Fees'. These are the fees charged to merchants who utilize the convenience and other benefits of the various card services. Large numbers are complaining bitterly about having no negotiation rights when these rates are established. These are one of the few sources of surplus funds to provide these other niceties.