Congress Forces Millions to Cut Up Their Credit Cards
December 10, 2010
Eight million Americans cut up their credit cards this year, according to new data out from credit bureau TransUnion. Some of those plastic deserters were folks who faced scary economic conditions and decided to voluntarily cut back on debt spending. But for others, it wasn't a matter of choice, according to Katherine Mangu-Ward, a senior editor at Reason Magazine.
- Millions of customers found themselves ejected from the ranks of the card-worthy thanks to last year's Credit Card Accountability, Responsibility and Disclosure Act, or Credit CARD Act.
- The new rules were supposed to "protect American credit card holders" by stopping "unfair rate increases."
- Instead, credit card companies prepared for their new straitened circumstances by booting customers who would no longer be profitable (read: poor people and other risky borrowers) and hiking interest rates for others.
But as the new rules make it less appealing for credit card companies to offer their services to certain segments of the population, most of those people don't revert to a cash-only state of nature. Instead, customers turn to options like installment plans, layaway and payday lending for quick credit -- and the fees they pay for those options are as high as or higher than the credit card costs, says Mangu-Ward.
Source: Katherine Mangu-Ward, "Congress Forces Millions to Cut Up Their Credit Cards," Reason Magazine, December 1, 2010.
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