Thursday, December 18, 2008

New Credit Card Rules--It's About Time!

I found this article today titled U.S. credit card rule changes approved by regulator. In a nutshell, it means that credit card issuers can't screw the consumer--or at least they'll have to find new and different ways to do so. Credit cards can't raise their interest rates except under certain circumstances such as a payment being 30 days or more late, require a grace period of 21 days, ban universal defaults where credit card companies jack up your rates because you paid a utility bill or gym membership late, and prohibit double-cycle billing.

These are long overdue in my opinion, and I'm glad to see such actions being taken. I've never carried any credit card debt, always paid my bills on time, and such so none of it really effects me. I'm not in favor of it because it'll save me money--I'm in favor of it because it's the FAIR and RIGHT thing to do--something credit card issuers should have been doing for years.

One quote in the article, a criticism of the new rules, goes, "Scott Talbott, chief of government affairs for the Financial Services Roundtable, said the rules will likely result in less credit as banks won't be as able to charge higher interest rates to riskier borrowers."

Let me be the first to call bullsh*t! First, consider the source--chief of government affairs for the Financial Services Roundtable? I'm not even entirely sure what that is, but it sounds like someone who's a hired gun of the credit card lobbiests who has a vested interest in ripping off consumers.

More importantly, however, banks CAN charge higher interest rates to riskier borrowers. What it DOES mean, however, is that banks can't give out artificially low rates then jack them up unexpectedly later. It means they have to be honest with their rates up front instead of the deceptive methods they used to get people to sign up at low rates then jack it up later. Borrowers who DO pay their bills late can still be hit with even higher rates.

In the short term, banks very well may reduce credit to consumers, but they're already doing that because of their own economic problems. I wouldn't go blaming these new rules for that. And honestly, if someone is already maxed out and can't afford their credit card bills already--why the hell would you give them MORE credit in the first place?! Hello?!

Scott Talbott continues by saying, "You need to be able to reprice for that risk, otherwise banks will grant less credit. You will have those who manage credit properly subsidizing those who don't."

Did you catch that? He said it himself--banks will reprice for that risk, otherwise banks will grant less credit. They have an option, and one of them is to NOT grant less credit. As someone who manages credit properly, I'm more than happy to do my part to subsidize those who don't. =)

These changes, undoubtably, will decrease the profits of credit card companies. They made a heck of a lot of money off their unfair practices, and during economic times like these, a lot of these credit card companies are having a tought time of it. Default rates are going up, and they need cash more than ever before. But I just don't feel sorry for them. From a credit card issuer's point of view, this is absolutely the worst possible time to have these new rules enforced. But they should have done it themselves years ago. NOW is always excellent time to stop screwing consumers. =)

Saturday, December 06, 2008

I Call Bottom!

It's official--there are some people suggesting that gas prices might go as low as one buck per gallon. Now, I'm not disagreeing that it could happen, but if I were a betting man, I'd bet that prices are more likely to hit $3/gallon before they hit $1/gallon. But with all my google sleuthing, I could find no recent news articles predicting that gasoline could hit $3/gallon, or even $2/gallon for that matter.

I'll tell you why--it's the same reason people were predicting oil prices would hit $200/barrel earlier this year--most people have a very short term view of the world. Gas prices have been going up for a week, then they will "obviously" continue to go up, and if gas prices have been going down for a week, then they will "obviously" continue to go down. Take the last two data points, draw a straight line from the first one to the second one, then continue that line out perfectly straight, and that's where gas prices will land next week.

But global events and decisions are already setting the base in place for another oil spike. Demand will continue to increase, but projects are being canceled. Investments in the Canadian oil fields that were supposed to usher in a source of dependable, albeit more expensive oil, are being put on hold or canceled outright. Investments in alternative energy which had been profitable with oil at $100/barrel, or even $80/barrel, are now losing money and additional investments are being scaled back or canceled. And now, apparently, our brief spike with high oil prices is fading in the distant memory--SUV's are back!

Let's do the math. Increased energy consumption + decreased energy investments = high oil prices. Just something to look forward to next year. I wouldn't dare predict when oil prices will spike again, but the fact that it will is about as certain as the sun rising tomorrow.

And since I'm already talking about oil prices, I'd like to say that car commercials that brag about their cars getting 25 mpg (more-or-less, depending on the car being promoted) are stupid. My 1990 Ford Taurus could do better than that--and that car was nearly 20 years old! To say that I'm underwhelmed is a major understatement. It's no wonder Detroit is doing so badly. The cars today get worse mileage than they did 20 years ago! I'm not sure that's something I'd want to brag about.....