On Friday, May 22nd, the government passed sweeping reforms of the credit card industry. The bill, commonly called "CARD," is designed to clamp down on the ways in which credit card companies can charge consumers, bump up rates, and how they must disclose terms.
Although the law is designed to protect consumers, the end effect may be to hurt consumers. Credit card companies have relied on income streams to the tune of billions of dollars for decades from some of the practices that will be eliminated because of the new law. Although consumers will now be protected because of CARD, the question now is whether all but the most credit-worthy borrowers will be able to obtain credit at all.
Because of the forecasted sharp decrease in revenue, credit card companies will be forced to be extremely picky on who they lend to. They will have to re-write or close as many accounts as possible before the law takes effect.
Consumers will feel the pinch. The negative effect will come in the form of higher rates, lower credit limits, annual fees, and closed accounts. Once the law take effect, credit as a whole will be tighter which is not something that is needed in today's struggling economy.
