Consumer credit dropped in May further than was forecast, with the decline being led by significant drop in credit card debt. Since 2002, credit card delinquencies fell to their lowest rate. As Americans conserve more and borrow less, credit card companies are coming up with new ways 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.
Source for this article: Plunging consumer credit spawns deceptive new credit card fees by Personal Money Store
Consumer credit drop will exceed 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, which includes most credit card debt, 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. 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 has increased only twice since the end of 2008. Consumer spending, which accounts for about 70 percent of the economy and is what The US is counting on to revive the economy, can be weak as Americans pay down their debt.
Credit card delinquencies dropping also
Right now, credit card delinquencies are declining 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, 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 the overall consumer loan delinquencies declined a lot, but only job creation will bring further improvement.
Credit card rules that are new and will be broken
Revenues are declining for credit card companies. But even with 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 can be able to get around numerous of the new rules. For example, new rules cap late fees at $ 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 credit card rules, consumers may think that credit card companies can’t raise interest rates on existing cards anymore. However 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 a when back and you see your interest rate skyrocket on your latest charges, that’s 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
Other credit card companies have recently hiked balance transfer fees; cash today 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 company is more significant now than ever. Do not assume its junk mail, because you are only going to have the 45 days to opt out if you really 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.
Discover more data:
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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