Just When They Need The Money, The Government Hacks Credit Card Firms (MA)(C)

Just when credit card issuers from Mastercard (MA) to Citigroup (C) need the extra money due to deadbeats, the federal government is going to make it hard for them to get it. Default rates are rising with unemployment and the distributors of the plastic are faced with billions of dollars of write-offs over the next year or so.

The only option these companies have had was to jack interest rates through the roof and bleed the cardholders for as long as they could. Regulators now have dropped bricks on the heads of the card issuers.

According to The New York Times, "The rules, which take effect in July 2010, will allow credit card companies to raise interest rates only on new credit cards and future purchases or advances, rather than on current balances."

That seems unfair. If people cannot pay off their balances and the card companies have to take the risk of carrying those balances in a hard economic environment, why shouldn’t they be able to charge more on money which is outstanding? They need to offset additional risk with additional charges.

Consumer activists don’t want to look at one critical point. If card issuers go out of business because they cannot balance rising default rates with increased interest, the number of companies offering credit will shrink. With a smaller number of competitors in the market new credit cards and future purchase costs would rise sharply.

It is actions like this that make it clear the the idiot class is still in charge.

Douglas A. McIntyre