The House this week is working on legislation that President Obama says will “ban unfair rate increases and forbid abusive fees and penalties.” So now the government is literally trying to legislate fairness. Obama, as the NY Times put it, is “seizing on the growing unpopularity of credit card companies.”
The proposed rules are mostly ludicrous. Anyone having a problem with their credit card interest rate, fees or penalties has options:
1) You can pay off your balance. Not easy, but the idea of a credit card is a temorary loan.
2) Shift your balance over to another credit card with terms you like.
If you can’t execute one of those options, you have credit problems. Which is the real bottom line here. Sorry, but if you sign a contract with a credit card company and you don’t understand the terms, and so are surprised by rate increases or penalties, that is your bad.
But if Uncle Sam steps in to save you from yourself, we all pay for it. Credit will be more expensive and limited for all. The hardest hit will be those at the bottom of of the credit market when they are cut off from any credit at all. Better they make smart choices and be sure to understand the credit card contracts, than be cut off from access to credit cards.