Giving credit where it’s due – and where it’s not

In keeping with the tone of the times, U.S. regulators have introduced consumer-friendly new rules for credit card issuers: as of July 2010, issuers can only raise interest rates on new cards and future purchases, but can’t jack up the charges on current balances. Furthermore, card holders will get 45 days notice before any changes are made to any of the terms on an account.

Not surprisingly, consumer advocates are now urging the introduction of similar rules for Canada – including one that would compel card issuers to pass along interest rate decreases in a timely way.

That’s a very popular stance to take and this next point is sure to be, well, really unpopular.

It’s just a reminder that people who don’t pay their credit card balances off on a monthly basis are carrying high-risk, unsecured credit – the most rare and expensive form of credit that exists, especially in these illiquid times. If they were corporations, they’d be paying a massive premium for that privilege.

Unlike the old Dire Straits song, you can’t get your money for nothing – or your chicks for free.

Gordon Buckland