Consumer credit dropped in May further than was forecast, with the decline being led by significant drop in credit card debt. Credit card delinquencies fell to their lowest rate since 2002. As Americans conserve more and borrow a whole lot less, desperate credit card companies are coming up with new solutions to gouge customers. New credit card rules that are aimed at curbing the usurious behavior of credit card companies may be giving consumers a false sense of security.
Consumer credit drop will exceed forecast
A Federal Reserve report that was released on Thursday showed that consumer credit dropped at an adjusted annual rate of 4.5 percent in May–the fourth consecutive month of declining credit. Revolving debt, which includes credit card debt typically, dropped by 10.5 percent ($ 7.3 billion) in May, according to the Fed’s report. In May, non revolving debt fell $ 1.8 billion. Business Week reports that economists’ projections in a Bloomberg survey ranged from a decrease of $ 5.2 billion to a rise of $ 2 billion in May. Since 2008, consumer credit increased only twice. Consumer spending, which accounts for 70 percent of the economy and is what America thinks will revive the economy, could be weak as Americans pay down their debt.
Delinquencies in credit card drop also
Credit card delinquencies are declining right along with consumer credit. The American Bankers Association (also known as the ABA) reported that late payments for bank credit cards fell within the first quarter to the lowest level in eight years. According to Market Watch, bank card delinquencies–card payments at least 30 days overdue, fell to 3.88 percent of all credit card accounts within the first quarter, compared with 4.39 percent in the fourth quarter of 2009. Credit card delinquency rate has been the lowest since it was in 2002. The ABA report also said that the overall consumer loan delinquencies declined a lot, but only job creation will bring further improvement.
New credit card rules to be broken
Credit card companies are seeing revenues decline. But besides new credit card rules intended to protect consumers going into effect next month, credit card companies are trying harder than ever to burn customers with creative new fees. New rules are easy to get around for banks. New rules cap late fees at $ 25 and do away with inactivity fees, but now more credit card companies are charging annual fees.
Companies for credit cards hope you won’t notice
When it comes to the new credit card rules, consumers may think that credit card companies can’t raise interest rates on existing cards anymore. But in reality, they can do anything they want with new balances, as long as they give 45 days’ notice. If your credit card company sent you a letter that you didn’t open a while back and you also see your rate of interest skyrocket on your latest charges, that’s probably what happened. Plus, credit card companies are able to cut credit limits and close credit cards without advance notice, which will really hurt a credit score.
Quickly open credit card mail
Many of the other credit card companies have most recently hiked balance transfer fees; cash today fees and foreign transaction fees. Gerri Detweiler, who is the personal finance advisor at Credit.com, told CNN that read the mail you get from your credit card company is more essential now than ever. Do not automatically assume its junk mail, since you really only have the 45 days to opt out if you actually read the fine print. And as credit card companies become much more desperate, they’ll not only raise existing fees but create all kinds of new fees.
More info available at these websites:
Businessweek.com
businessweek.com/news/2010-07-08/consumer-credit-in-u-s-declined-more-than-forecast.htmlv
Marketwatch.com
marketwatch.com/story/credit-card-delinquencies-fall-to-8-year-low-aba-2010-07-07?reflink=MW_news_stmp
CNN Money.com
money.cnn.com/2010/06/30/news/economy/credit_card_act_new_rules/index.htm?postversion=2010063007
