A credit card is a plastic card issued to a user to enable him or her to conduct financial transactions. With its introduction, credit cardholders have been able to make purchases depending on their individual credit rating. At the same time, the credit card issuers have ventured into a lucrative investment considering the charges levied on the card user per every transaction and the high frequency of these cards’ use by the holders. As a result, there have been several debates concerning the greatest beneficiary of all the players in the credit card industry (Bilker 48). This has necessitated the analysis of the effects of the credit cards on the various parties involved.
For the credit cardholders, the credit card service has provided a simpler and convenient access to short-term loans during transactions, fraud protection, and other benefits offered by the issuers. However, on the contrary, the credit cardholders have become vulnerable to impulse spending, inflated pricing and the high interests, which result in bankruptcy (Chorafas 124). To protect the cardholders, the issuing bank commits to pay merchants at the instance of a transaction authorization. This is executed regardless of whether the consumer has defaulted on the credit card payments or not. Therefore, in this regard, the formulation of policies that seek to protect the cardholders and enhance the credit card’s convenience facilitates the industry’s growth and development.
The credit cards issuers are bound to benefit with the formulation of policies that addresses the shortcomings within the industry. Several aspects influence the operation of the credit card issuers and sealing the loopholes will boost profitability and efficiency in the industry (Manning 32). The industry’s beneficial aspects such as the codes of practice, card fraud prevention, major infrastructural changes, development of standards, and other crucial matters determine the credit card issuers’ success in the industry. The adoption of the appropriate policies helps in curbing the card-issuing institutions’ exploitation of the cardholders. In addition, the consumers’ rights are observed to ensure good business relationships with the providers.
The new reforms seek to end the controversial card-issuers billing practices by establishing rules that are easily understood. In this regard, payments will incorporate a reduction of the high interest rates on balances, thus allowing customers to pay off their balances conveniently (Mann 59). Similarly, due dates will be streamlined to avoid the confusing periods of receipt of payments. Additionally, this approach will eradicate instances of double-cycle billing.
The reforms will cushion the Credit cardholders from a rapid increase in the interest rates. The reform allows customers to reject any attempts of increasing the interest rate without a proper consultation. This implies that the interest rate increase on the outstanding balances is restricted unless under certain conditions. At the same time, during the first year of the credit card issuance, there will be no interest rate increase. In later years, issuing company will notify the cardholders any increase in the interest rate (Weiss 41).
Concerning the fees charged to the cardholders, instigating the proper terms and conditions is vital to ensure convenience between the cardholder and the issuer. This indicates that over-the-limit fees will be according to the customers’ wishes. Moreover, the credit card issuers will be restricted on the fees they charged their customers with respect to the bills payment. For the subprime cards’ fees, they will be totally prohibited (Chorafas 140).
Considering the different age groups among the credit cardholders, the issuing companies will protect the young people through the inclusion of additional rules. In this regard, issuing companies will have to ensure that the young people have the capability to settle their debts or have a co-signer. Additionally the approach will eradicate cases of promotion and marketing within institutions will be prohibited. As a result, only prospective individuals will enroll in the service without the enticement on the benefits attributed to it (Mann 68).
With the resolution of the challenges in the credit card’s industry, all stakeholders will benefit. For the customers, they will be able to settle bills effectively. On the other hand, the credit card-issuers will be regulated appropriately concerning their profits and customer service delivery objectives. Nevertheless, the issuing companies will be somehow limited on their means of generating revenue since all loopholes will be sealed.