Credit Card Companies Gearing Up for Losses
February 28, 2010 – New York, New York– A new shattering era is coming for credit card institutions and banks. With the recent enactment of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 last Monday, these institutions are gearing up for major losses to be seen in the next few years. JPMorgan Chase predicted that it would lose up to $750 million in 2010 alone because of the CARD act. Other lenders have also reported estimated losses to be between 400 to 600 million dollars and more than $50 billion in the next five years. There is no doubt that these institutions will have rough times ahead of them.
These losses are increased by the fact that credit companies can no longer determine when they can raise the interest rate of the cardholder. In the past, lenders were able to raise rates whenever they wanted. Now, they are not allowed to raise interest rates on previous balances and must wait 2 months before they are able to raise the rates on late payers.
After predicting tremendous losses, lenders are scrounging to find new opportunities to make up for losses. Some lenders are targeting their wealthier clients to pay for higher annual rate Rewards cards while other lenders are tagging on additional new fees that have not been seen before. Fifth Third Bank is now issuing a dormant fee for $19 for those accounts that have not been active for 12 months.
The future still looks unsure for many lending institutions. They are trying desperately to remain relevant during these hard times. The economy has slowly been improving while the unemployment rate has decreased creating some sort of stimulation that has helped lenders to remain in the public eye.
Brad Nifdom, Spokesperson for CreditTime says, “Lender’s efforts to on top of their game may work on a limited scale but they will still have a rocky road to travel on for the next couple of years.“
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