What Stiffer Credit Card Regulation Means

Financial regulations are in the works to revamp the credit card industry. There will be limits put on late fees and interest penalties. While that’s a welcome reprieve for many credit card holders, what this actually means is that credit card issuers are going to be quite tough with their lending practices. Fewer people will receive offers, and those that do will have much different terms to contend with on the new cards. It will make other forms of financing, like payday loans, much more attractive than in the past.

What Offers?

Your credit score will matter much more. Many banks aren’t even sending out credit card offers out the way they used to. The many who continue to hold their cards open are being pressured into closing out the account, just to reduce the interest rate that has been pumped up without reason. Lending limits will also be smaller, making it difficult to get too much into debt.

The Return Of The Annual Fee

It used to be that you could get any card you wanted without an annual fee. Then, if you had a balance on one card and they raised the interest rate, you just hopped to a different card, and transferred the balance for nothing. That game is completely over. With annual fees ranging from $80 to $100/year, you’ll think twice before opening a new account. In addition, transfer fees can be significant, costing a few hundred dollars more, depending on the balance.

Creating A Market For Payday Loans

It’s possible these new regulations are going to make payday lending more attractive to consumers who are looking to finance small sums of money. Why go through all the bother of trying to get a credit card with a bad credit score, when there is no credit check for a payday loan? Even with stiff interest rates on cash advances, the fact that there is no annual fee for a payday loan, and the initial loan is often free, will create demand in this area for consumers who used to turn to credit cards for emergency cash loans.