According to virtually every press account, the recent credit card law means trouble for customers who pay their balances in full every month. Deprived of extra profits from interest rate increases on heavy debtors, the logic goes, credit card companies will have to recoup the extra revenue from non-balance-carriers. Some commentators even go so far as to argue that monthly interest payers are "subsidizing" everyone else, and that the decline in revenue from the former will have to be made up by making the latter pay their "fair share".

Arguments of this type pop up every time something negative happens to the credit card industry. Yet here we are, with annual fees hovering around zero--often with "cash back" rebates of one percent or more--for customers who pay off their balances. If credit card companies could get away with charging balance-free customers annual fees, then why don't they already?

In fact, the supposed free ride enjoyed by non-borrowers is a product of two factors:

• Whatever they may say, credit card companies make good money off non-borrowing customers. The transaction fee charged merchants for credit card purchases more than covers the costs and risks of serving those customers, given that their current balance and default risk is so consistently low.


• Customers careful and stingy enough to pay off their balances every month are also typically willing to shop around for the best credit card deal, forcing credit companies to compete for their still-profitable business.

Neither of these factors is at all affected by the latest legislation. It's therefore a good bet that any future attempts on the part of the credit card companies to squeeze more money from low-risk customers will be feeble, short-lived and unsuccessful.