Credit Card Reform

Congress just passed a significant credit card regulation bill that would, among other things, place limits on raising interest rates and charging fees.

I'm not a fan of government regulation, but if we had to choose an industry to regulate based on slimy and slick practices, I admit credit card companies would be at or near the top of my list. If you've ever taken the time to actually read through all of the fine print on a credit card application, congratulations. You deserve some college credit, or something, for that. With that much fine print, you know they're up to something.

At any rate, I have one very simple idea that I threw past US Senator Mike Crapo. He liked it. Maybe you will too.

Instead of enacting intricate regulation, credit card companies should simply be required to disclose in simple, prominent, bold, and large print on every statement the amount of actual dollars the consumer has had or does have available vs. the amount the credit card companies have required from the consumer.

It's simple. Add up, over the history of the credit card account, all the cash advances, purchase amounts, and remaining credit on the card. Then contrast that with all the payments the consumer has made plus any outstanding balance. Two figures should be displayed very visibly on each statement.

Additionally, credit card companies would have to publish this ratio, collectively, of all open accounts.

If John Smith sees that he's purchased 500 dollars worth of items, taken out 300 dollars for a cash advance and still has two hundred dollars left in available credit, John will see that that credit card company has allowed him use of a thousand dollars. But, if John has already paid $1,000 making minimum payments, still has an $800 balance with only $200 credit available, he'll quickly see what exactly the credit card company is doing, and he, the consumer can make an educated and informed decision about what to do next.

This simple disclosure requirement will change consumer behavior, plus put pressure on credit card companies to offer more attractive products to consumers.