Kinder, Gentler Credit Cards?

Over the past month, a few of the major credit card issuers have announced some consumer-friendly changes they are making to their practices.

Just a couple of days ago, Citibank announced that it will end its practices of:

• “universal default” — where an individual’s interest rate can be hiked if the borrower misses a payment with another lender, even if the borrower is otherwise current.
• “any time for any reason” — where the lender can change the rates and fees due whenever they deem fit. With the announced changes, as long as the borrower pays on time and stays within their credit limit, Citibank will only change the margin on their interest rate and fees when a card expires and a new one must be issued.

Several weeks ago, Chase also announced that it will end using the controversial “two-cycle billing” method, where borrowers are charged interest on a two-month period, rather than a one-month period, if they do not pay their balance in full. Under that policy, consumers who do not pay their balance in full end up paying interest on principal they have already paid off.

That the timing of these announcements coincides with the commencement of a series of congressional hearings by the Senate Banking Committee and House Financial Services Committee on credit card industry policies, I don’t think is a coincidence. Does it portend more changes to come? Time will tell, but based on the results so far, it seems likely.