A downturn in the business

From the Arizona Central comes this story of a business having a bad time:

Credit-card issuers' problem: People are paying bills
The credit-card industry has a problem: Although Americans are deeper in debt than ever, they are paying off bigger portions of their monthly credit-card bills.

For card issuers, which profit by collecting interest on unpaid balances, that's bad news. In the past, when interest rates crept up, as they are doing now, fewer cardholders could afford to pay down balances.

"Normally at this point in the economic cycle, you start to see payment rates decline. But that's not happening," says Richard Srednicki, who runs the credit-card business at J.P. Morgan Chase & Co., the nation's second-largest card issuer. "It is a tougher business if payment rates continue to stay up and consumers continue to pay off more. It's something we've got to understand and work at."

Although consumers are using plastic for more of their daily purchases, they are giving card issuers fits by juggling their debts more shrewdly. When cardholders are hit with high interest rates on one card, they routinely transfer balances to new cards at lower rates. And in recent years, as real-estate values soared and mortgage rates fell sharply, more consumers wiped out credit-card debts altogether by borrowing against their homes.

To make matters worse for card issuers, federal bank regulators issued new guidelines in 2003 meant to ensure that cardholders pay off more each month than just the fees and interest charges that have accumulated. To comply with the rules, many banks have raised minimum-payment requirements, bumping up the payment rate further.

Heh... The fees these guys charge to businesses for processing just cover the operating costs. The interest is their cash cow and that seems to be giving curdled milk these days. Makes me wonder if they will raise the rates to businesses -- might make for a competitive market for business owners...