Credit card Oxymoron

The credit card industry is on the edge. Being a card issuer is not the most comfortable feeling now. After the mortgage meltdown, an impending consumer recession, falling interest rates, regulatory pressure, Merchants crying over interchange, consumer activism, fraud......

The card issuer dilemma is indeed unique; they appear to be justified on all fronts or they look to be completely on the wrong side; depending on which side of the prism you are looking through!

With interest rates falling, there is a lot of pressure on card issuers on pricing. However, with rising delinquencies, recession, meltdown and mortgage fallout, reducing APRs seems to be stupid. How do you protect your revenues when you see your cost of default going up? You got to price for the cost of risk.

But try telling that to the consumers - who got 'Egg' on their faces! Banks cutting credit limits, jacking up APRs, cancelling 'risky' customers- certainly not looking to making friends. Not particularly popular with consumers who believe that banks make 'super profits'.

The American Banker reports this morning about legislation being drafted in the US Congress that would "amend the antitrust laws to ensure competitive market-based rates and terms for merchants' access to electronic payment systems." This is the battle on the 'Merchant front' where Interchange has been the bone of contention and a subject of numerous lawsuits. The cost of card acceptance now hurts more in a recession.

So, Card issuing banks and institutions are in for rough times. A  pithy situation where you can do nothing right and contradictions galore!