Credit Card Issuers in Transition

Thus far, it looks like some old standbys are coming back ahead of the CARD Act's provisions becoming effective in February, namely higher interest rates, the return of annual fees, and even lower credit limits for existing customers, who can most times opt out of the changes and cancel the cards.

Among the big banks, Citigroup (C Quote), JPMorgan Chase(JPM Quote), and Wells Fargo(WFC Quote) have been among those believed to be raising rates for certain customers ahead of the legislation's enactment.

AmEx, which has set up a special section of its Web site to communicate with customers about the impact of the CARD Act, has been aggressive about winnowing down its number of accounts. The company's cards in force declined in both the second and third quarters as it opted to cancel 3.3 million cards globally that it said were "spend inactive over the last 24 months and balance inactive from 12 to 24 months."

That strategy of trying to hold onto more desirable customers while pushing away others who are less appealing for a variety of reasons -- a poor credit score/track record of payment, infrequent usage, pay bill in full each month -- is likely to come into play for all the major issuers. JPMorgan has already made a conscious decision to develop specific brands for certain customer segments, and there's evidence others are following suit, such as BofA's introduction of its Basic brand Visa card in early September, which the company says is a simplified offering designed with the new rules in mind.

The holy grail is scaling back the customer base to prime borrowers who will make heavier use of credit cards. From a demographic standpoint, Baby Boomers are ideal because they tend to see the cards more as a payment tool, says Ron Shevlin, a senior analyst at Aite Group, a Boston-based research and advisory services firm. "The money to be made there is in not in the interest fees," says Shevlin. "The money to be made is in the interchange fee."