SAN DIEGO — New credit card regulations, in effect February 2010, will outlaw 150 to 200 basis points of revenue on today’s account, PSCU Financial Service’s Tom Chandler and Chris Joy told yesterday’s Credit Union Times Best Practices Conference audience here.
The men provided strategies to replace profits lost due to new restrictions on re-pricing and payment application, as well as new collateral material requirements. Adjustable rates, cash advance fees and assessing late fees sooner were among the suggestions.
Because lenders will no longer be able to re-price fixed rates or apply payments as they see fit, Joy said interest rate risk is greatly increased.
“Credit unions should consider moving to adjustable rate credit cards, because the Fed Funds rate can only go up from here,” Joy said.
When pricing credit cards, Chandler said credit score agencies can provide average loss rate statistics according to credit score class. Risk based pricing would increase according to what is needed to cover increased risk as credit score falls, he said.