Consumer credit dropped in May much further than was forecast, with the decline led by significant drop in credit card debt. Credit card delinquencies fell to an all time low 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 that are aimed at curbing the usurious behavior of credit card companies may be giving consumers a false sense of security.
Post resource: 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 much consumer credit dropped at a 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. In May, non revolving debt fell $ 1.8 billion. As outlined by Business Week, 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 US is counting on to revive the economy, will be weak as Americans pay down their debt.
Also, credit card delinquencies drop
Right now, credit card delinquencies are declining 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. According to 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, in contrast to 4.39 percent in the fourth quarter of 2009. Since 2002, the credit delinquency rate has been the lowest. 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 can be broken
Revenues are declining for credit card companies. But even with new credit card rules that are supposed 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. 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.
Numerous credit card companies just 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 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 a while back and you also see your rate of interest skyrocket on your latest charges, that’s what happened. Plus, credit card companies can nevertheless cut credit limits and close any of their credit cards without advance notice, which will really hurt a credit score.
Quickly open credit card mail
Other credit card companies lately hiked balance transfer fees, cash till payday fees and also foreign transaction fees. Gerri Detweiler told CNN that read the mail you get from your credit card company is more important 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 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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