Consumer credit dropped in May further than was forecast, with the decline being led by significant drop in credit card debt. . As Americans save more and borrow a whole lot less, desperate credit card companies are coming up with new solutions to gouge customers. New credit card rules aimed at curbing the usurious behavior of credit card companies may be giving some of their consumers a false sense of security.
Consumer credit drop exceeds 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 involves most credit card debt, dropped by 10.5 percent ($ 7.3 billion) in May, according to the Fed’s report. Non-revolving debt, including car loans, fell by $ 1.8 billion in May. It was reported by Business Week that economists’ projections in a Bloomberg survey ranged from a decrease of $ 5.2 billion to an increase of $ 2 billion in May. Consumer credit has increased only twice since the end of 2008. Consumer spending, which accounts for about 70 percent of the economy and is what The United States is counting on to revive the economy, can be weak as Americans pay down their debt.
Also, credit card delinquencies drop
Credit card delinquencies are declining right along with consumer credit. It was reported by the American Bankers Association (ABA) that late payments for bank credit cards fell in the first quarter to the lowest level in eight years. As outlined by Market Watch, bank card delinquencies–card payments at least 30 days overdue, fell to 3.88 percent of all credit card accounts in the first quarter, compared with 4.39 percent in the fourth quarter of 2009. Since 2002, the credit delinquency rate has been the lowest. The ABA report also said that the overall consumer loan delinquencies declined a lot, but only job creation will bring further improvement.
To be broken-new credit card rules
For credit card companies, revenues are declining. But besides new credit card rules designed to protect consumers going into effect next month, credit card companies are trying harder than ever to burn customers with creative new fees. CNNMoney.com reports that banks can be able to get around many of the new rules. For instance, new rules cap late fees right around $ 25 and do away with inactivity fees, but now more credit card companies are charging annual fees.
Hope you won’t notice – credit card companies
When it comes to the new rules, consumers may think that credit card companies can’t raise interest rates on existing cards anymore. But in reality, they can do anything that they really want to with new balances, as long as they give 45 days’ notice. If your credit card business sent you a letter that you didn’t open a when back and you see your interest rate skyrocket on your latest charges, that’s probably what happened. Plus, credit card companies can still cut credit limits and close any of their credit cards without advance notice, which will really hurt a credit score.
Right away open credit card mail
Other credit card companies have most recently hiked balance transfer fees; cash now fees and foreign transaction fees. Gerri Detweiler, who’s the personal finance advisor at Credit.com, told CNN that read the mail you get from your credit card business is more essential now than ever. Don’t assume its junk mail, because you are only going to have the 45 days to opt out if you actually read the fine print. And as credit card companies become more desperate, they’ll not only raise existing fees but create all kinds of new fees.
More details about this topic 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
