The new credit card reforms have brought with it some watered down features of the rewards programs. With the new reforms in place the prime spenders would be wooed with goodies while the average one will have to face some petty fee structures and changes.
The card companies are going to offer rewards programs that could get worse for most people. If one is used to paying huge charges and has a great credit the changes may not be really noticeable. Card companies would still scramble for business, that's another thing altogether. Once the new provisions come into effect all these changes will come into effect, which may be in the month of February.
Adam Jusko, Founder, Index Credit Cards, stated that the latest changes would be brought about due to the CARD Act wherein rewards programs would be far less lucrative. But most of the changes would occur in lieu with one's past credit history and spending habits, which may be a cause of concern, he said.
For the ones with a low FICO score (less than 620), it might be a tough scenario as getting a card in the first place would be next to impossible. Ben Woolsey, director, marketing & consumer research, was quoted as saying, that while the ones with fair credit will face fewer options than those that were present in the past. This would mean a lowering of credit lines while the interest rates get higher for these individuals.
The ones who would get a 'lions share' stated Woolsey, would certainly be the prime as well as superprime customers. While the prime credit would vary between lenders, individuals with FICO scores of 700 and upwards would stand to benefit.
The ones in this slot need not vie for attention by carrying balances forward. The prime target would be someone with a consistent high-paying job and an excellent credit record and someone whose monthly expenses on the card are quite high, stated Curtis Arnold from CardRatings.com. Lenders seem to have become more and more averse to the ones who keep revolving credit; hence those who are in the habit of carrying balances are a strict no-no while the prime spenders have become the coveted lot.
All this has been direct fallout of the recession. As delinquencies began shooting up card companies started cutting down on some of their rewards programs and sidelining the risky clients. The 5% rebates on certain purchases were also done away with.
As per the new act issuers will have to change their business practices as the past trends would be cut off, wherein the issuers made huge profits through unfair practices (retroactive rate hikes for instance), default in payments as well as applying the payments to the balances with the lowest interest.
Card companies are not taking these reforms lying down. They are already working on experimenting with new fee structures as well as new rewards programs etc. They too have to make up for the lost profit margins and are hence targeting the prime as well as the superprime clients in the hopes of making profits in the future.