The Main Effects of the New Law to Credit Card Companies

Under the new law, the credit card company is required to give you 45 days written notice before raising the interest rate on exist card and list out the amount of time it would take a customer to pay off his balance for every bill. The statement will show you the ugly truth of the gimmicks that card companies have used to drive up profits.


The credit Card Act of Accountability, Responsibility and Disclosure of 2009 aimed at protecting consumers from sudden interest rate hikes, excessive fees and other moneymaking gimmicks may be only favor the wealthy. These regulations are leading all issuers like American Express Co. to the top of the credit food chain. The will race to use reward points to keep customers with top credit scores, while the excessive competition is never a good thing in any industry.


The average credit score of cardholders for American Express is 754, which is 32 points above the other counterparts. The borrowers with top credit scores, for example, Walt Serafin, who is the Biotechnology company manager and a cardholder of AmEx, used reward points from his top scores credit card paired with a holiday discount and purchase an Apple iPhone. While the borrowers with low credit scores were aimed at making up for lost revenue because of the new law. They may encounter new membership fees, difficulties applying for credit.


The Credit CARD Act also caused the issuers tight their lending standards, while a large numbers of card companies have already relaxed lending restrictions and a lot of customers get high consumer loans in the fourth quarter. While in the same period, many cardholders focus on trying to pay off their debt and the revolving consumer credit has been falling every month, it reached a low point and fall by 9.6%, 2009,showed by the Fed report.

The Recently Conditions of Consumer Credit Card

Consumer Credit Card's focus is to provide consumers with helpful information regarding credit cards and credit related issues. Consumers slashed their credit card debt levels by more than $1,600 in 2009, according to the latest Federal Reserve report on consumer credit, and experts say a down economy will continue to leave borrowers with a distaste for debt.


And recently, it brings a complex phase to the consumer credit during the first month of the year of the report from the Federal Reserve Board.

According to the Fed in January consumer credit in the form of credit cards with a 2.4 percent average rate of advance. Compared to December last year, overall consumer credit fell 2.2 percent. As a whole, it is showed in January, the outstanding loans amounted to $2.45 trillion U.S. dollars in consumer credit.

Based on the recent report from Federal, the auto loans and other kinds of no revolving debt came in at $1.59 trillion for January. The consumer credit seems to grow along with the No revolving credit growth, which showed rose at a 5% annual rate in January, compared to a 3.7 percent increase last month, and a 7.7 percent decline in November.

Though with the increase of no revolving credit, most consumers trying to pay off their balance in full. In fact, till last year, the revolving consumer credit of credit card companies has been falling every month, it reached a low point and fall by 9.6%, 2009,showed by the Fed report. Though, as it showed a drop in revolving consumer credit of 2.3%, seems not as drastic as previous declines of 12.9 percent in December and even 18.5 percent in November.

The decline of revolving consumer credit is a double-edged sword, it may suggest that there are more people paying off their credit debt while on the other side, it means the customers find it hard to pay off their credit card debt and the banks had to charge off of what is owned them.

New Information about Credit Card

The third quarterly report shows that Visa ( V - news - people ) recorded profits of $1.02 per share or $763 million. Compared with the same period last year of 10.9 billion, Visa with the Sum (volume or amount) of business transactions increase of 12 percentage points, which defeated the Street's call for 91 cents per share. The report also suggested that more customers are using the card, the number of cards people carrying a Visa brand rose by 5%.


The collect fees business model avoid the credit risk of Visa company. With solid earnings per share and improved operating revenue, Visa posted a healthy start to fiscal 2010, which make distance from its rival MasterCard.

Reported just after the Wednesday's closing bell rings, Visa's result is really positive, while followed by rival MasterCard's latest quarterly earnings, through investigation analysis, Thomson Reuters expect MasterCard's profit to jump 32% to $2.47 per share.

It is differ from banks and other lenders, Visa and MasterCard took the business model by allowing financial institution partners to issue their branded cards, in order to avoid credit risk. This model also helped both of them avoid the pitfalls of many other financial institution of competitors.

The issued new regulations that came into effect on Feb. 23 about the card issuers still exist a lot of influences and restrict an element. Shares of Visa fell .6% to $83.52. Based on other major credit card issuers, including Bank of America ( BAC - news - people ), Citigroup ( C - news - people ) and JPMorgan Chase ( JPM - news - people ) survey, the results were still negative, improved by credit card metrics, even with the challenges. Results were announced on Thursday shows that : shares of Visa declined 6% to $83.52,but gained 2.4% after hours. Shares of MasterCard down 2% to $247.58 but get back 1% in the extended project.


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