Your bank may not love you anymore

As interest rates and fees rise, Americans’ love affair with credit cards appears to be waning. Credit cards may be ready for a break-up, too.

Constrained by both Congress and the economy from some of their most profitable practices, banks are trying to figure out how to make money under the new conditions. Already, it seems, one result is going to be that fewer people will be able to get credit cards, and even those with good credit may find using those cards more expensive, The New York Times reports.

The days of attractive credit cards offers in every day’s mail are over, Leslie McFadden reported in Bankrate.com’s Plastic Rap blog. Not only are customers receiving fewer offers, the offers they’re receiving are not nearly as good as they used to be.

Citing research from Mintel Comperemedia, a market research firm, Bankrate’s McFadden reported that credit card issuers sent 71% fewer offers in the third quarter of 2009 compared with the same period last year.

• Bing: Should you cancel your credit cards?

And the offers were much less attractive, she reported. Only 6% had fixed interest rates, compared with 27% a year ago. Only 5% of solicitations that offered an introductory rate offered that rate for 13 months or more, down from 50%.

A new law scheduled to go into effect in February restricts banks’ ability to raise interest rates and levy fees. In response, banks have been rushing to raise rates and fees before the law goes into effect.

Banks have long profited from late fees, penalty fees and high interest rates charged to a small group of customers, the NYT reports. The rest of us benefited. But, facing restrictions on those fees and rates, the credit card companies are trying to figure out how to make money off everyone else.

Denying credit to those least able or willing to pay doesn’t seem like a bad thing. As the NYT puts it, “that means tens of thousands of Americans will no longer be able to splurge on Nike gym shoes or flat-screen televisions unless, of course, they have enough cash to pay for them.” This seems like a good idea.

But customers with good credit who pay their bills on time may also decide they don’t need credit cards, or at least as many, if it means paying fees for something they’re used to getting for free.

Jason at Frugal Dad is down to one card and he’ll get rid of that one if the company starts charging him a fee for paying off his balance every month.

At what point do we just make ourselves immune to the whims of bank CEOs and government officials and say to heck with credit cards? Just shred ‘em! Well, I am getting pretty close to that point. If the issuer of my last card decides to play these fee games I’ll take a pair of sharp shears to it and live on cash. Come to think of it, I doubt I’d miss them.

I use one credit card for every transaction I can, paying off the balance each month and collecting cash-back rewards. Plus, I can easily download my transactions into a personal finance program to track my spending. But how much would I pay for that convenience? Interesting question.

What about you? Could you live without credit cards? What actions by the card issuers would prompt you to “just shred ‘em”?

Related reading:

• Credit cards’ worst practices more widespread
• Canceling a credit card
• 4 credit cards that will treat you right
• Ditch your bank for a credit union