It’s a good thing they did. Yesterday’s story on credit cards parroted industry spin that new legislation reining in its abusive practices will hurt good customers (revealingly called “deadbeats” within the industry) who pay their bills off each month.
Today, the Times’s money columnist Ron Lieber calls BS on all that.
As Weiss says:
Today, the Times ran what was tantamount to a front-page correction, in the form of a column by Ron Lieber. He points out all the stuff that yesterday’s article didn’t have, and downplays the possibility that card issuers will withdraw all the perks cardholders currently get. After all, there are transaction fees!
Lieber isn’t having any of the industry’s spin:
For months now, the card companies have been threatening to cut rewards programs sharply to make up for revenue lost because of the new restrictions.
My guess, however, is that this talk is just so much saber-rattling.
Card companies want to make money, and big spenders help them do it, even if those cardholders do not go into debt.
Plus, Lieber performs an excellent service by laying out what the legislation will actually do, while explicitly pointing out the shady practices the industry engages in now:
Banks must send out your bill no later than 21 days before the due date. They cannot send it with, say, 14 days to go, hoping that you won’t get a check to the bank in time to avoid a late fee.
If the card company gets your payment by 5 p.m. on the due date, it’s on time, according to the new rules. No more of this early morning deadline nonsense, which led to late fees for payments that arrived with the afternoon mail. Also, no more late fees if the due date is a Sunday or holiday and your payment doesn’t arrive until a day later.
And check this out (emphasis mine):
Let’s say you’re paying different interest rates on the debt on a single card — one for a cash advance, another for a balance transfer and a third for new purchases. Now, when you make a payment over the minimum balance, banks will have to apply it to the highest-interest debt first. I bet you can guess how some banks used to handle this sort of situation.
But this is even better (emphasis mine):
Banks will need your permission before allowing you the “privilege” of spending more than your credit limit and paying a fat $39 fee for that privilege. The card companies should be ashamed that they needed a law to make this “opt in” requirement a reality.
I love it.
Now Lieber is a columnist who can more easily get away with saying this, but I’ll just point out that it’s great that you get a sense that he has a real moral and ethical compass here. I think readers love that and this kind of thing gives them a more personal relationship with the paper. There’s no sense in getting caught in the newspaperese of false balance and he said/she said, even if you’re a news reporter. These abusive practices are simply wrong, and they should be reported in that light.
And one last smackdown of the industry line seen just yesterday on the same page. To do so, he points to the obvious thing the paper missed yesterday: the huge transaction fees card companies make from retailers off every purchase:
So will credit card companies kill reward programs or drastically scale most of them back? Of course not…
People who spend a ton generate fees galore from merchants, and that money helps the card company stay in business. So you may soon see card companies giving away more goodies or lowering annual fees for people who hit certain spending thresholds each year. American Express already does this on a number of cards.
Applaud the Times for putting this column on page one—and for getting it right.Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at firstname.lastname@example.org. Follow him on Twitter at @ryanchittum.