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 their lowest rate since 2002. As Americans save more and borrow less, desperate credit card companies are coming up with new methods to gouge customers. New credit card rules aimed at curbing the usurious behavior of credit card companies may be giving consumers a false sense of security.
Forecast exceeded by consumer credit drop
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, according to the Fed’s report. In May, non revolving debt fell $ 1.8 billion. Business Week reports 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 can be weak as Americans pay down their debt.
Delinquencies in credit card drop also
With consumer credit, credit card delinquencies are declining. 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 in the first quarter, compared with 4.39 percent in the fourth quarter of 2009. The credit card delinquency rate, the lowest it’s been since the first quarter of 2002. They also said that overall consumer loan delinquencies declined, but only job creation will bring further improvement.
New credit card rules are to be broken
For credit card companies, revenues are declining. But even with new credit card rules designed to protect consumers going into effect next month, credit card companies try harder to burn customers with creative new fees. New rules are easy to get around for banks. New rules cap late fees at $ 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 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 when back and you see your rate of interest 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 advance 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 important now than ever. Don’t automatically 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 much more desperate, they will 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
