WASHINGTON (TheStreet) -- Credit card issuers have lost billions of dollars on bad loans during this economic downturn, and new rules might hurt their revenue streams further.
In May, Congress passed the Credit Card Accountability, Responsibility and Disclosure Act, a law designed to protect consumers from rapid interest rate increases and certain penalties. Some of its provisions began in August, and the next become effective on Feb. 22.
Issuers are trying to find ways to boost their incomes, and these efforts will likely come at the expense of cardholders. Here are some predictions for the credit card industry this year:
1. More cards with annual fees: About 20% of credit cards in the U.S. have an annual fee. That percentage will increase this year. New cards have already been introduced with annual fees and some credit card issuers are testing annual fees on their existing cardholders.In October, Bank of America (BAC) told a small percentage of customers that it planned to charge an annual fee of $29 to $99 on their accounts beginning this month. Only a few customers (0.5%) received the notice, but the outcry against this annual fee was loud. JPMorgan Chase (JPM) is using premium rewards to encourage customers to select or upgrade to cards with annual fees. They introduced the Sapphire Preferred card, which has an $85 annual fee and enhanced benefits. 2. Increases in interest rates: Even though the CARD Act limits the issuers' ability to raise rates "at any time, for any reason," expect issuers to find loopholes and create opportunities to raise rates. Because the CARD Act limits interest rate hikes during the first year for cardholders, issuers are likely to boost their advertised annual percentage rates to lock customers in at a higher rate. 3. Increases in existing fees: The CARD Act doesn't limit fees, so expect issuers to raise existing fees. For example, the industry standard for balance transfer fees was 3% a year ago. If you transferred $10,000, you would incur a $300 fee. Bank of America has since increased its balance transfer fee to 4%, and JPMorgan and Discover (DFS) lifted their fees to 5%. Expect other issuers to follow. Cash advance fees are also likely to increase. 4. Introduction of new fees: Expect issuers to add new fees. Fifth Third Bancorp (FITB) charges users a $19 inactivity fee if they don't use their cards for 12 months. In August, Citigroup (C) informed some cardholders that they will be charged an annual fee of $30 to $90 unless they spend at least $2,400 per year. Some retail cards are adding a $1 monthly processing fee if you request a printed statement.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV