When the Credit CARD Act of 2009 – which was implemented in 2010 – took place, merchants and customers cheered. Credit card companies were required to pay billions of dollars to retailers and cap the amount that could be charged per swipe. In addition, retailers could place a minimum purchase amount to further cut back on fees, as well as lower the prices for customers. But there are repercussions to the act, not just to credit card companies but to first-time credit card owners as well.
Though the Act lowered late fees and surprise interest rate increases, a report by the American Bankers Association found that credit card interest rates have managed to grow, keeping some borrowers out of the market. In addition, the number of subprime borrowers has also fallen as well.
“Credit cards and credit card credit are less available during the same period, particularly for subprime borrowers,” the ABA explained. “The amount of credit card debt outstanding has decreased at a higher rate than other consumer debt. Furthermore, credit card debt as a percent of disposable income has decreased while non‐revolving, non‐mortgage debt as a percent of disposable income has increased.”
Not only does this mean that customers trying to rebuild their credit may be forced to turn to alternative lending strategies, this also is keeping banks from making the maximum amount of profits. For many qualified borrowers unable to receive a credit card, payday lenders or other options often only emphasize the cycle. However, with credit management software, banks can offer opportunities to qualified borrowers that may have been overlooked, and build profits to make up for the funds lost due to the Credit CARD Act.
