Follow the bouncing ball of unintended economic consequences. Banks forward credit to people who can't afford it at interest rates that are really high. Predictably, default rates on credit cards rise. Perhaps more predictably, to protect the consumer from evil bankers, the Government passes regulations on the interest rates that can be charged. Sounds 'fair' until you realize that banks have to look for ways to recover the lost revenues from not charging market based interest rates.
The solution? Charge higher fees to customers with good credit.
The banks are starting to charge fees to reliable customers in response to a slew of new credit card industry regulations that will limit when banks can hike interest rates. Cardholders who get a new annual fee notice in the mail will be in a no-win situation.
"They can either pay that fee or they can close the account, and if they have had the account for a while and they close it, they are potentially going to hurt their credit card score," said Woolsey.
Analysts say right now the banks are trying to figure out what their customers will tolerate. Many say they'd cancel cards with a high new annual fee.
Still sound 'fair'?
