August 27, 2010
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News: Tricks Of The Trade
Americans have significantly reduced their credit card debt over the past year mostly due to the recession and largely due to the excessive fees and high interest rates imposed by lenders. During the battle over the approval of the Credit CARD Act 2009, lenders continued to threaten cardholders that if the bill were to pass it would mean less credit availability and higher card costs. There is no question about it, the credit card industry held true to its threats. However, the industry was surprised to learn that cardholders also remained true to their goals. Cardholders have continued to pay down debt which has cost the credit card industry millions in lost income. Cardholders have also gotten better at managing card payments as well. Lenders along with the major card networks, Visa and MasterCard have also lost income due to reduced swipe fees.
As Americans reduced the use of credit card spending, they increased the use of debit cards. Banks and card networks generate earnings with debit card swipe fees as well; however, the percentage is reduced. In some cases, it can cost the industry as much as 2 percent when a consumer uses his debit card in place of a credit card. Merchants prefer when the customers choose debit over credit because it means less for them to pay as well. Although, smaller debit card swipe fees may prove to be a blessing for merchants and consumers, but for Visa and MasterCard, it's a curse.
As the U.S. economy begins a slow turnaround and credit cardholders have finally taken back the market, lenders have begun to seek out other alternatives to making money. Visa and MasterCard aren't quite ready to let go of the business which its estimated worth is over $20 billion a year. Therefore, Americans can expect to see some increased presence by the major networks as they too look for new ways to generate lost revenue. Keep your eyes opened so you don't become blindsided by any of their tricks.