If you're invested in any credit card lenders, or are considering doing so, dig into exactly how they make their money. I suspect that you'll find a few shocking but pleasant surprises. You should also be on the lookout for some not-so-pleasant changes in the offing.
For starters, you probably know that card companies like Visa
If you're starting to get disgusted, put your investor cap back on. Remember that these kinds of fees all generate top-line revenue, both for Visa and MasterCard, as well as for banks such Capital One Financial
Many critics have complained of excesses in the card industry, suggesting that consumers have been getting ripped off. In December, our friends at the Federal Reserve Board set some new rules for card companies, including the requirement that they mail bills at least 21 days before payments are due. This will lead to fewer late payments and less income in fines. That's good for consumers (yay!), but perhaps not so good for card company investors. Companies were also ordered to stop hiking interest rates without sufficient notice or cause.
With a new administration in Washington, I wouldn't be surprised to see further reforms of the industry. Interested investors might want to keep an eye out.
In the meantime, I encourage you to spend some time in our credit and debt collection -- you might leave with a lower interest rate, tips on avoiding identity theft, or a plan for digging yourself out of debt.
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Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article. JPMorgan Chase is a Motley Fool Income Investor recommendation. Best Buy is a Motley Fool Inside Value pick and a Motley Fool Stock Advisor recommendation. The Fool owns shares of Best Buy. Try our investing newsletters free for 30 days. The Motley Fool is Fools writing for Fools.