Consumer credit dropped much further than was forecast, with the decline led by significant drop in credit card debt. Credit card delinquencies fell to their lowest rate since 2002. As Americans conserve 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.
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 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 a rise of $ 2 billion in May. Consumer credit increased only twice since 2008. Consumer spending could be weak as Americans pay down their debt.
Credit card delinquencies are declining right along with consumer credit. The American Bankers Association (ABA) reported that late payments for bank credit cards fell within the first quarter to the lowest level in eight years. It was reported by Market Watch that 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.
Credit card rules that are new and could be broken
Revenues are declining for credit card companies. But besides new credit card rules intended to protect consumers going into effect next month, credit card companies try harder to burn customers with creative new fees. CNNMoney.com reports that banks could 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.
Credit card companies 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 also 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.
Always open credit card company mail
Other credit card companies have most recently hiked balance transfer fees; cash advance loans fees and foreign transaction fees. Gerri Detweiler, personal finance advisor at Credit.com, told CNN that read the mail you get from your credit card business is more significant now than ever. Do not automatically assume its junk mail, since you really only have the 45 days to opt out if you really read the fine print. And as all of the credit card companies become more desperate, they will not only raise existing fees but create all kinds of new fees.
Discover more information:
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
