Thursday, August 13, 2009

Government Failure: Credit Card Regulation that Makes Our Lives Worse Off

Economist Bob McTeer once explained in this post how misguided credit card regulation implemented by the current administration would lead to unintended consequences and make the lives of responsible credit card users worse off. In his words:
higher bank costs in one part of their business will likely be recovered in another part of their business. "Good behavior" is once again likely to be punished for the "bad behavior" of others...
Well, I just received a letter confirming this prediction. According to one of my credit card administrators, "the credit card industry is facing unprecedented market conditions" and, as a result, "we are increasing your variable APR for regular purchases." I bet other administrators will follow soon. I also know someone that always pays her credit card bills in full and yet cannot increase her credit limits due to the same "unprecedented market conditions."

Personally, I don't care much about the rate hikes, since I always pay my credit card bills in full. Yet the new regulation clearly made my life worse off. It'll become a bit more personal however when credit card administrators decide to impose fees or reduce benefits to recover revenue losses due to inept regulation.

1 comment:

Fernando Carreiro Albuquerque said...

Here in Brazil I've heard strong recommendations and noisy rumours in the same direction: credit card regulation. Why? Because they say there is a monopoly in he credit card market.