Marketplace looks at one impact of the new rules for credit cards that went into effect today — a profit shift from penalties to perks. Banks used to make money on interest-rate increases and fees. With those (loosely) regulated now…
RON SHEVLIN [a banking products analyst for the Aite Group]: The best customers for the credit card issuers are going to be people who pay the balances off every month but make a lot of use of the card on a regular basis. That’s going to drive a lot of interchange revenue for the issuers.
Interchange fees are what merchants pay card companies every time you use your card. They added up to nearly $50 billion last year. To push that number higher, card companies are looking for ways to convince the credit savvy to swipe with abandon. So, Shevlin says, card companies will give more to get more.
SHEVLIN: People who make heavy use of the credit cards are doing that to run up their rewards points. So you see firms going back now and strengthening and bolstering the quality of their rewards programs. As they compete for new business, they’re going to look at the rewards programs as the new battlefield.
I canceled a couple cards last week. It’s time to shop around for reward warriors.
SEE ALSO: The Consumerist’s quick primer on the card act. explains what the CARD act actually does. And NPR on the card industry’s aggressive reaction to the legislation.