The New Credit Card Era: What to Expect

The new law that President Obama signed to rein in the credit card industry will go into effect next year, even though we’re beginning to see the signs of change already. John Ulzheimer takes a look at what the credit card environment may look like in a year:

1. You will likely see an increase in the minimum credit score requirements making it more difficult for higher risk borrowers to get approved. The magic credit score number borrowers need to eclipse will almost definitely go up as the issuers cope with the new requirements.

2. Consumers will be forced to accept higher rates from lesser-known issuers who target non-prime borrowers as mainstream lenders make it harder to get loans. You may see solid borrowers going to issuers they would have avoided in the old days as the mere act of borrowing money gets more expensive for everyone.

3. For consumers who still have some credit risk, anticipate skyrocketing rates. And for those who have poor credit, they may not be able to get credit cards at all. Many consumers may have to choose to do business with lesser-known credit card issuers, who are more likely to embrace the new business from people fed up with the “big boys” of the industry. The smaller, regional banks and credit unions stand to benefit because they are not in as dire straights as the big issuers and thus can take more risk with accepting new borrowers.

4. Expect small business credit cards to gain popularity. The new legislation does not apply to business cards, which makes them a good option for a single-person LLC or a family business. The debt accumulated on these cards stays off your credit reports and will not damage your scores but it will still hold you liable for the account.

>>Web Extra: How to Keep Your Credit Score on the Up