There are several factors now that are minimizing the possible areas of profitability for credit card companies. One is the fact that more and more people are being less qualified with the banks and other credit card providers` standards. The number of unemployed consumers is still overwhelming thus it is not surprising to know that most people are getting low credit scores due to delinquencies in paying bills, bankruptcies and foreclosures. This situation is lessening significantly the number of people whom the credit card companies make profit with.
Another major factor influencing the “hard times” of credit card issuers is the CREDIT Act. This credit card law is restricting credit card issuers of controlling when to increase their interest rates and when not. Also there are restrictions set by this law with regards to the fees they are collecting like the dormancy fee for gift cards.
Now that credit card issuers are less able to move to increase their profits with the regulations set by CARD Act one of their initial reaction is to increase their qualifications to reduce the risk they will be taking. However this would also mean that they will be minimizing the population that they could serve to those with outstanding credit scores. Considering the numbers of credit cards issuers competing with the small population of consumers with excellent credit rating, another way should be created to adjust with the situation.
One of the ways “invented” by credit card companies is the creation of new types of fees that are not covered by the law and that are working discreetly.
One of the common fees banks and other credit card issuers use to make some profit is the fee for reward redemption. This fee is designed as a pre-requisite before one can get the rewards he/she earned. This is highly inline with redeeming air line miles. This reward redemption fee can cost consumers from $20 to $50.
Another fee associated with rewards is the reward recovery which is amounting to $29 typically. When you earn your reward points it doesn`t mean they are yours for good. Now when you have records of late payments your points can be confiscated and you have to bail them out for a price to pay. Some companies call it reward score freezing (applicable for delinquent payers) in which you can only get hold of your scores again through paying bills on time.
These are just two types of fees that consumers need to be aware.
