Courts Free up Banks to Issue Amex and Discover Credit Cards
A Credit Article Contributed by Mark Mcclelland
Banks Free to Issue Alternative Credit Cards
Banks that have only been able to issue MasterCard and Visa credit cards in the past are now free to issue American Express and Discover credit cards as well due to a lower court ruling stating that Visa and Mastercard's "exclusionary rules" constituted anticompetitive behavior, and that was left standing by the Supreme Court recently. For all intents and purposes, the MasterCard and Visa rules prevented banks that issued MasterCard or Visa credit cards from offering any of the other competing credit cards, like American Express cards or Discover cards, to it's clients.
And what, exactly might this mean for you, the consumer? Well, for one thing it'll mean you'll probably be asked by the Post Office to install a larger mailbox because of all the additional junk mail you'll be getting; just kidding; but even so, you'll be getting a lot of new offers in the mail, and some might even be worth looking at.... some.... maybe.
New "Free" Credit Card Benefits Likely
It likely that both American Express and Discover are going to be rolling out a large number of new "products" as they're called - credit cards that tout free this or free that - with benefit programs that offer points, or miles, or travel, or cash-back, or gasoline, or discounts on merchandise, or any number of other so-called rewards. American Express has yet to specify how many new products it plans to roll out, while Discover has rolled out at least 5. These events portend a large change in the credit card landscape in the near future.
But There's Nothing Really Free about Credit Cards is There
But there're a couple of things you can bet won't change, in the least, and that's the interest rates changed or the fee structures employed. Credit card companies are pretty much like the airlines, in that they all seem to follow one another down the same road when setting rates and terms; a change by one is soon followed by similar changes in the others. Thus it is with the credit cards companies; they all have a tendency to adopt similar rate and fee schedules.
American Express isn't going to charge it's customers a measly 3% annual percentage rate (but wouldn't that be great) when it knows that Discover can charge its customers 15%, or even 18%, with no drop in it's customer base. Wouldn't make sense. Well, that's not exactly true: it would to us, but it wouldn't to them. So don't hold your breath waiting for an interest rate war any time soon (although that'd be fun too wouldn't it).
And then there's always been the question about the cost of these new benefits to us, the consumer. As has been said before, and will be said again, nothing is free when it comes to credit cards, and you're going to pay for that "affinity" program one way or another.
The argument that the new cards will offer consumers added value and increased innovation, or that consumers will be the winners in the end is simply specious and just so much marketing hyperbole. The consumer is NEVER the winner in this business. The credit card companies are in this business to make money, plain and simple. And before we get crossways here, there's nothing wrong with that either.
The way they make money is by lending money, and the more they can charge you for the privilege of borrowing from them the better off they are. In the final analysis, all these reward and affinity programs are simply fancy ways to get you to borrow more from them so that they can, in turn, collect larger amounts of interest and fee income from you, which in turn makes them richer and you poorer. Ahhh... the status quo.
