Credit Card Chaos: What Banks Aren’t Saying

Credit card craziness. The credit card market’s blowing up. All sorts of crazy stuff going on.

I want to touch on three things real quick today.

First, JPMorgan taking over the Apple Card. Not a ton to say there yet. It’s still too early to tell how that’s going to play out, but expect that card to be more competitive and more differentiated, given the fact that Chase has been in the credit card business for a long time.

Second thing, 10% interest rate cap. Our fearless leader has decided that a 10% interest rate cap makes sense. Let’s be real. The reality is that impacts consumers in a very significant way, and it’s not good.

If interest rates are 10%, banks and credit unions will be forced to basically cut their portfolios significantly, reduce credit lines and probably eliminate much of the credit that’s available to the average consumer today. It’s the only way it would work economically.

Even for credit unions who don’t make money, they couldn’t afford it and would run the risk of losing money in that space.

I don’t necessarily see that as being a real risk. At least I hope not.

The one that I think is more concerning, and I want to spend a little bit more time on, is the Credit Card Competition Act. This is, again, creating alternative networks on the credit card side of the equation.

Yes, theoretically it’s only for institutions over $100 billion, but the reality is it impacts everybody because 90% of the volume is at the institutions that are over $100 billion. So it’s pretty hard to create distinction for that last 10%.

We see some real risks with the Credit Card Competition Act should that get passed. There could be some serious implications for not only rewards and interchange, but the profitability of credit cards in general.

That doesn’t even consider disruptors like Cash App and Venmo and buy now, pay later that are already putting enormous pressure on the credit card business.

So, not surprising. I’ve been in the credit card business, this is my 30th year, and it does not get any easier. It just seems to get more complicated.

So keep your eyes open, keep your ears open. Let us know in the comments what you’re doing to deal with the credit card craziness.