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 an all time low rate since 2002. As Americans save more and borrow less, credit card companies are coming up with new ways 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.
Article resource: Plunging consumer credit spawns deceptive new credit card fees by Personal Money Store
Consumer credit drop exceeds forecast
A Federal Reserve report released 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 dropped by 10.5 percent ($ 7.3 billion) in May, as outlined by 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 increased only twice since 2008. 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.
Credit card delinquencies dropping also
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 within 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 within the first quarter, in contrast to 4.39 percent within the fourth quarter of 2009. The credit card delinquency rate, the lowest it is been since the first quarter of 2002. The ABA reported also said that overall consumer loan delinquencies declined, but only job creation will bring further improvement.
Credit card rules that are new and will be broken
Credit card companies are seeing revenues decline. But even with new credit card rules that are intended to protect consumers going into effect next month, credit card companies are trying harder than ever to burn customers with creative new fees. Banks could be able to get around new rules. 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 think that credit card companies can’t possibly raise interest rates on existing cards anymore. But 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 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 credit cards without advance notice, which will really hurt a credit score.
Credit card mail needs to be opened
Numerous of the other credit card companies have most recently hiked balance transfer fees; cash til payday loan fees and foreign transaction fees. Gerri Detweiler told CNN that read the mail you get from your credit card business is more important now than ever. Don’t 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 more desperate, they’ll not only raise existing fees but create all kinds of new fees.
More info accessible at these sites:
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
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