According to figures recently released by the Federal Reserve, consumer credit card debt has declined further. In May, credit card debt annual rates decreased by 3.65%. Consumer personal savings are on the rise as well. Personal savings rate, a measure of the amount American consumers set aside from their disposable income for savings, climbed to 6.9%.
The April figures placed savings at 5.6%. These figures show a trend of American consumers moving towards a financial habit of frugality, tightening their budgets and settling their debts while minimizing expenses.
The current trend towards frugality is likely to stay for the long term. Consumers, stung by the economic crisis and currently burdened with the credit crunch, are likely to focus more on building up their savings and keeping their cash instead of spending. Furthermore, the activation of the credit card bill will most likely make it easier for consumers to keep a tight rein on their money. The transparency amendments in the bill alone will help American consumers realize just how much their debts will cost them, making them choose smarter when they want to spend. The entirety of the credit card bill won't become active before February of next year but, by the 20th of August, a part of the bill will become active which will make credit card companies give 45 days advance notice for any rate changes and force them to send credit card bills three weeks before they become due.
With these two regulations in place, credit card holders will have more time to figure out whether they want to stay with their credit companies, in the case of rate hikes, and how to best payoff their debts, in the case of monthly bills. Credit card holders who are amply forewarned of any rate hikes by credit companies will have enough time to shop around for better credit card deals before the increased rate actually becomes active. Also, if they receive their credit card bills earlier, credit card holders will have enough time to arrange payments accordingly, thus avoiding late payment fees and interest hikes.
While consumers go for frugality, credit companies are busy increasing interest rates and fees and cutting off credit. Chase cards recently upped their minimum monthly payments from 2% to 5%. Bank of America raised their balance transfer rates to 4% from 3%. A few of the major credit companies are also moving their fixed rate credit cards to variable rate ones. Thus, interest rates can still fluctuate without ample notice even with the credit card bill in place.