BIS is delighted at its latest consumer-pleasing regulatory change involving credit cards.

[T]he Department for Business, in a move that has been widely welcomed, has stopped the "swizz" of credit card companies insisting that any money paid off was used to repay the cheapest debt first, trapping the expensive debt on the card for as long as possible.

Kevin Brennan, the Consumer Affairs Minister, said: "Our consumer research showed that most consumers didn't know this was happening and they felt this practise was a bit of a swizz."

Sounds good, doesn't it?

Oh, but here's the consequence:

[C]ardholders should be aware that this change in payment order may have some unintended consequences, for example a reduction of zero per cent balance transfer deals."

This suggests that financial services companies will respond to regulatory changes that impact profitability to restore that profitability by other means. In this case, by removing 0% balance transfer deals altogether.

But if we apply this to the proposals for the Robin Hood (Tobin) tax, we can see that the same argument applies. The banks will simply restore their profitability by increasing charges.

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Filed under: Current issues, Regulation with tags credit cards, tobin tax