You may not be a business owner, but as a consumer you are probably aware that all businesses face many challenges during the start up periods. Yet, it’s hard for anyone in today’s economy to think of credit cards facing any type of business challenge.

The Credit Card Story continues to unfold. It was 1982 – ’83 that was pretty much the end of the usury laws and during that period with a reduction in inflation credit cards rose from strained beginnings to become profitable. Up until 1983 credit card users were charged 18%, but the cost to the credit card companies was high. As we all know, they weren’t down for long, credit card companies experienced great profitability from 1983 to 1990.

In some ways the early 2000s could be compared to the 1980’s with lots of borrowing and plenty of freewheeling spending. As a new marketing promo the rewards program
became a big hit. In 1989 Citibank struck a deal with American Airlines which turned out to be a ride up and away through the clouds. This ‘rewards’ concept snowballed from there. In addition to the new world of available credit, many consumers wanted the cards just to get the ‘rewards’.

And along came Jane, no, along came FEES ! At first, unlike today, fees were not considered to be a mainstay of the credit card business. Actually they were a afterthought, however as competition grew, they started focusing on their most lucrative customers. Those who are dear to the hearts of credit card companies, people who only pay the minimum payment and don’t make timely payments - people who are charge fees often.

Competition is good for credit users, because lower rates were offered to entice new customers and annual fees were mostly eliminated. But these incentives got into the pockets of the credit card companies so the fees became more apparent as a new stream of income for them.

Credit card reforms developed. Consumers started questioning credit card companies ethics and their business practices. In 2008, the Office of Thrift Supervision, the Federal Reserve Board and the National Credit Union Administration adopted a set of regulations to protect consumers from the more obvious lending practices. This regulation will go into force in 2010. Come back there is more to this story.

Spectrum Resources has the mission to assist you in learning how to live inside the family’s income. Counseling in debt, credit and homeownership issues entails empowerment with education and an action plan to get out of debt. Call 863-967-0660 Email: SpectrumResources@tampabay.rr.com
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