I just finished listening to a conference call about the credit card reforms that went into effect Monday. If you're unfamiliar with the changes, Creditcards.com has a nice cheat sheet as does Federalreserve.gov.
After outlining the new law, I asked Michael Barr, Assistant Treasury Secretary for Financial Institutions, and Austan Goolsbee, senior economic adviser to the President, about their thoughts on some of the changes that card companies implemented just before the reforms went into place. If you're a cardholder, I'm sure you know what I'm talking about: higher interest rates, lower credit limits, annual fees - that sort of thing.
Barr cautioned me about linking the changes directly to the new law. He said it's just as likely that the changes were implemented by the card companies because of "vast changes in the marketplace" (a.k.a. the credit crisis and a lower tolerance for risk).
I see his point, but I think the timing of these changes so very near to the August and February phases of the CARD Act reforms is suspect.
I also mentioned that many readers are worried about the changes that will end up costing them more. His response? The CARD Act promotes "more transparency so people will be able to see what the cost of credit cards are and make their own judgments."
In other words, if you don't like the changes, don't use credit. It's a theme I saw repeated in the comments from my previous blog post about the return of the annual fee.
But isn't it hard not to have a credit card in the 21st century?
Some transactions, such as renting cars, are tougher without a credit card. Credit cards also protect more from fraud and theft than using debit cards, checks, or cash. Many credit cards have zero liability policies, meaning that you don't pay a dime if someone rings up a bunch of fraudulent transactions on your plastic. No one is going to reimburse you if your wad of cash is stolen.
