Credit Cards » Credit Card News » Town Hall Discussion on Credit Card Issues on the Way
Date May 12, 2009

Town Hall Discussion on Credit Card Issues on the Way

Category: Obama, credit card news, economy

Town Hall Discussion on Credit Card Issues on the WayAs the credit card crisis continues, the White House is once again flexing its influence to confront the issue affecting a large majority of American citizens. This time, President Barack Obama plans to hold a town hall meeting during a planned stop in New Mexico on May 14. The President plans to open discussions on the credit card crisis during the meeting and to push for the passage of the credit card reform bill in Congress.

Robert Gibbs, press secretary of the White House, expressed to reporters the administration’s “strong desire to get something done on an issue of tremendous importance to middle class families and that is to rein in some of the excesses and some of the abuses that we’ve seen from credit cards over the past many years”.

Gibbs further elaborated on the administration’s stance saying, “For many people, credit cards provide an opportunity to finance purchases, but we think there’s a more equitable way to do that. Those reforms are on their way through Congress.”

The White House press release came as cardholders were reeling after the effects of the sudden interest rate increases and banking fees that came to effect last year and earlier this year. Rate hikes and card fees became the norm as banks struggled to keep afloat while the economic crisis continued. Unfortunately, cardholders were ill prepared for the sudden interest and fee increases, having to contend with a failing job market and a drop in the property markets.

The first signs of the changes on credit card legislation were first seen in the  new federal rules which were set to become effective on July 1, 2010. Earlier this year, the credit card crisis got some much needed attention from President Barrack Obama and a bill arrived in the House of Representatives early this year.

The credit card amendment has already passed through the lower house and is currently going through deliberations in the U.S. Senate. It passed through the House of Representatives late in the month of April and was known as the Credit Cardholders’ Bill of Rights. The passage was by an overwhelming vote of 357 to 70.

In the U.S. Senate, the bill is sponsored by Senator Christopher Dodd and Senator Richard Shelby, who is Dodd’s GOP counterpart. The Senate bill has been named as The Credit Card Accountability, Responsibility, and Disclosure Act or the Credit CARD Act. The bill is supposed to be a tougher version of what the House of Representatives recently passed.

As the bill continues to be deliberated in the senate, President Obama’s town hall discussion is calculated to boost support for it and, at the same time, inform the public on what the bill entails and what it will mean for the American cardholder.

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Date May 9, 2009

MakingHomeAffordable.gov May Help Mortgage Woes

Category: Obama, People and Credit, economy

As a result of the drop in the property markets, many homeowners have found themselves in a difficult situation. The drop in property values has left many homeowners with properties whose values are way below what they owe in their mortgages. Thus, should these affected homeowners want to sell their properties, they would have to bring cash to the table.

MakingHomeAffordable.gov May Help Mortgage WoesThe mortgage problem is at the forefront of the economic concerns that the Obama administration is trying to solve. Early last March, President Obama launched the foreclosure prevention program.

The foreclosure prevention program is aimed at reducing the debt problems that around 4 million U.S. citizens are facing. The $75 million plan approaches the problem in a number of ways. Mortgage investors, loan servicers and borrowers will receive government incentives. Subsidies for interest rate reductions will also be made available.

In return for these incentives, the foreclosure prevention program tasks companies to modify loans to make them more affordable. In particular, the plan aims to change loan rates so that a typical household’s housing payments would amount to at most 31% of its gross monthly income. Those homeowners who have kept up with their payments also get the chance to refinance for lower-cost loans, even in cases where they have minimal or no equity.

During the launch of the foreclosure prevention program, borrowers were already informed to contact their respective loan service companies. However, the companies said that they would need a few weeks before they could actually begin to process applications. Just recently, banks have begun to do just that.

A number of homeowners have started receiving the benefits of President Obama’s foreclosure prevention program. The previous week, Chase Mortgage of JP Morgan Chase issued 15,000 or more mortgage modifications. Bank of America has also released around 100,000 letters to its borrowers and actually began assisting borrowers at risk in April.

For those who are interested in getting their mortgages adjusted, the best solution is to visit the website MakingHomeAffordable.gov. From there, they can take an online quiz to see if they qualify for the program. Eligible borrowers are then given a list of paperwork to prepare. Once the paperwork is ready, they can then contact their loan service company and follow their instructions to apply for debt modifications. Not all loan service companies are participating in the plan, however. Also, borrowers should be able to negotiate with their lenders through the phone and there is usually no need for a face to face meet.

After contacting the lending company, borrowers will have to wait for the company to decide how to help them out. The company can choose to lower the loan’s interest rate, reduce the balance of the debt, or extend the life of the loan. The goal of the lender will be to lower the monthly payment to at least 38% of the borrower’s monthly income. Once 38% is reached, the government will pay the lender in order to bring that figure down to 31%.

With President Obama’s foreclosure prevention plan, many homeowners in danger of losing their homes can breathe easier. With a lowered monthly payment rate, a majority of homeowners should make it through. An important thing to remember, however, is that the loan modifications do not become permanent until the borrower keeps up with the monthly payments for three months consecutively.

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Date May 8, 2009

20 Million Home Owners With Negative Equity, Study Shows

Category: Money Management, People and Credit, economy

House OwnersRecently, real estate website Zillow.com released figures from a study they made which indicate that the figure of homeowners currently paying higher debt mortgages than the worth of their homes at 20%. That roughly estimates to 20 million U.S. home owners.

These homeowners are in the unenviable position of being “underwater” or having “negative equity” in terms of home mortgages. This means that, if these homeowners were to sell their homes, they would actually have to pay money for their property to be sold. This sad state of affairs is the result of the sharp drop in real estate prices that the country has been experiencing these past few months.

The extent of the damage varies. The most hit areas include Stockton, California with an estimated 51.1% of homeowners are facing negative equity. In Modesto, California, the numbers are lower, but not by much at 50.8%. One of the worst hit state in the country is Las Vegas with an estimated 67.2% of homeowners own properties that are hardly worth the mortgage that they owe.

Vice president in charge of data and analytics in Zillow, Stan Humphries stated that, “A combination of falling prices and low down payments has left many borrowers underwater. In some markets, more than half of all homes are in negative equity.”

Humphries further elaborated that homeowners with negative equity are finding themselves in a very risky situation. Without a reliable financial buffer, any unexpected emergencies involving money, such as medical bills or unemployment, can severely stress their finances. In extreme cases, these homeowners would be facing foreclosures.

The data used in the study conducted by Zillow.com came directly from their own home price estimates. These estimates are obtained by collecting records of sales and using the current price trends for the other homes in their target communities. The home price estimate figures are then compared to the initial loan balances of homeowners. This will then show whether the homeowner has a negative equity property.

Zillow.com’s analysis takes into account the mortgage balance of the homeowner upon purchase of the property and the changes in the price of the property since then. It does not take into account the possibility that homeowners may have already paid the principal amount.

Humphries stated that the analysis is actually quite conservative. According to him, the trend for homeowners have been to remove value from their properties by taking home equity loans and other credit lines against it rather than adding to its value through paying up the mortgage of the property.

Not all industry experts support Zillow’s findings, however and the real extent of the damage from the property market crisis is still up for debate.

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Date May 4, 2009

Financial Literacy Survey Results Indicate Americans Not Taking Advantage Of Free Credit Reports

Category: People and Credit, credit card news, economy

In March 2009 a financial literacy survey was conducted on behalf of The National Foundation for Credit Counseling clipboard(NCFF) by Harris Interactive. One thousand consumers age 18 and over were contacted by telephone to answer various personal finance questions. Despite the fact that lending decisions are based on credit history and score, many consumers seem unaware or uninterested in staying up to date on the information reported on their credit report. The results of this survey indicate 64 percent of respondents have not ordered their free credit report in the last 12 months. More than one-third of the people surveyed admit they do not know their credit score. Reviewing your credit report is essential in spotting inaccurate reports which may cause your score to drop or warning signs of identity theft.

The third annual survey reports the following findings:

  • Less than half of adults surveyed track their spending which has been proven to help improve savings and reduce debt. Seven percent, nearly 16 million adults have no idea how much money they spend on basic necessities and other expenses. Eighteen percent of adults claim the reason for not having a budget is due to not wanting to be restricted on how much money they spend.
  • Due to the current economy, 57 percent of adults are spending less than they were last year, although 45 percent of consumers spending less agree they would return to previous spending habits if their financial situation were to improve.
  • Seventy-two million adults report they have no savings. Generation Y makes up for nearly half of the adults with no savings. Twenty-three percent are saving more than they did in the previous year. If faced with an emergency those with no savings would be forced to either use a credit card or take out a loan to pay for expenses.
  • Fifteen percent of respondents admit to making late credit card payments in the last twelve months. More than 13 million adults have household debt (credit cards) exceeding $10,000 with balances carrying over from month to month. The same number have accounts in collection and are either considering or have filed for bankruptcy.

These results indicate what most of us already know, many American consumers have a long road ahead in establishing financial security. Increasing financial literacy is vital in saving millions of adults who currently heading down the wrong financial path. The good news however is that 70 percent of respondents report paying all their bills on time with no debts in collection. Other positive results show that 41 percent of people saving money have over three months income in savings. The spotlight often falls on consumers who are struggling with debt, however 46 percent of people surveyed do not carry any credit card debt from month to month and sixty-one percent of respondents currently live on a cash-only basis.

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Date May 3, 2009

Number of People Sued by Credit Card Companies Increasing: Here’s What to Do If You Are Sued

Category: Bad Credit, Credit Card Management, Credit Repair, Debt Consolidation, Money Management, economy

lawsuitIt’s difficult to track exactly how many debt collection cases for defaulted credit card debt are filed because they are filed along with all civil cases through the prothonotary’s office. Capital One, a credit card company known for lending money to individuals with less than perfect credit histories, have filed a large number of cases. In Lancaster, Pennsylvania, of 255 cases filed during the first three weeks of April, Capital One filed 45% of them (a total of 114). Neither the attorney representing most Capital One lawsuits in court, Paul Klemm, nor Capital One representatives returned phone calls from reporters regarding this issue.

Attorneys who have counseled clients facing bankruptcy or credit card defaults have stated that more credit card companies than ever before are attempting to recoup some of their financial losses by taking card holders to court. In previous years, credit card companies would sell off their debts (for pennies on the dollar) to debt collectors and collection companies. Lawsuits, if filed, would be filed by debt collectors – not the credit card companies themselves. Now that the economy has nosedived and credit card companies are having trouble finding buyers for their unpaid debts, they are becoming more aggressive about collecting on defaulted accounts themselves. A successful lawsuit means a greater recovery rate for the credit card company.

The credit card industry states that the changes made by the U.S. House of Representatives on Thursday, April 30th, would cost the industry more than $10 billion per year in interest payments. The figure was obtained through a study by the law firm Morrison & Foerster. Changes to the credit card laws include restriction of interest rate increases and prevention of credit cards given to anyone under the age of 18.

If a creditor takes you to court, here is what you can do to build your case:

Prepare a Budget: list all of your monthly expenses and obligations from utility statements, invoices, receipts, and billing statements and show proof of your monthly income.

Document Medical Conditions: if a medical condition has made it difficult for you to keep up with your payments, or medical expenses are eating up all of your income, get documentation of your medical condition from your doctor(s).

Respond to the Court By the Due Date: do not ignore the situation as it will not go away. If you don’t respond to the court prior to the date listed on your letter, the creditor will automatically win due to your inaction. There are sample response letters you can use online, or call and talk to the court clerk for assistance in how to respond to the court regarding your credit card suit.

Document Changes: many people are unemployed or laid off at this time, which makes it difficult or impossible to pay your bills on time. Get documentation if this has happened to you. Other life changes can also contribute to the inability to pay for bills, from having a baby, becoming depressed, medical conditions, etc. If they can be quantified by doctors or employers, these are all viable reasons and should be mentioned in court.

Document What You’re Doing: If you’ve joined a debt relief solution, such as a debt management company or a credit counseling service, obtain proof from the company. This shows you aren’t just sitting back and skipping out on your bills and that you’re making an attempt to remedy the problem.

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Date May 2, 2009

Time Line of Credit Cards

Category: Credit Card Management, Money Management, Statistics, credit card news, economy

In 1949, Frank X McNamara, shared a meal with two friends. When he reached into his pocket for his wallet so that he could pay for the meal (in cash), he discovered that he had forgotten his wallet at home.  He called his wife to bring him some money – and suddenly a  new idea was born.  A credit card that could be used at multiple locations and not require someone to have cash on them. Previously, retailers had their own credit cards and made money out of the loyalty of the cardholders, since the cards could only be used at their locations.

McNamara’s credit card, the Diners Club, would need a different method to make money since they wouldn’t be selling anything.  Restaurants and retailers who accepted the Diners Club credit card as payment were charged a 7% fee for each transaction, and the cardholders were charged $3 annually (starting in 1951).

The first Diners Club credit cards were given out in 1950 to 200 people- who were mostly friends of McNamara.  The card was accepted in 14 restaurants in New York, and were made of paper.   It was hard to get retailers to agree to accept the card because they saw it as competition for their own credit cards, and customers didn’t want to bother with the card unless there were a large number of retailers who would accept it as payment.

The credit concept grew and by the end of 1950, more than 20,000 people were using the Diners Club credit card.
Competition for credit cards began in 1958, when Bank Americard (later called Visa) and American Express both started offering their own credit cards.

In 1975: Citibank adopts “plain language” contracts, and decreased the loan agreements from 3,000 words down to 600.

In 1983: The governor of South Dakota, Bill Janklow, signed a state law that allowed credit card contracts the  ability to change at any time and for any reason. This explains why the majority of credit card companies operate out of South Dakota.

In 1988: The Federal Truth in Lending Act was amended to include more specific contracts.  Credit card companies responded by offering pages and pages of complicated fine print.
During the MID-1990s: Financing and credit cards are offered to riskier borrowers with low introductory rates and steep fees and penalties.  Capital One and several non-bank institution finance firms lead the way with these offers.

In 2000: The larger banks use their “change-in-terms” clauses provided in 1983 to increase interest rates on good borrowers in order to recover from losses of customers not paying their credit card bills.

In 2005: Questionable mortgages with “teaser” rates are given to people who are not likely to afford the homes, and more credit cards are given out.

In 2008: The Fed adopts new restrictions for credit cards that go into effect in July 2010, with separate legislation designed to protect cardholders from many issues under the “Credit Card Bill of Rights”.

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Date April 29, 2009

Visa Commercials Promote Debit Cards

Category: Credit Score, Low Interest Credit Cards, Money Management, Obama, People and Credit, Rewards Programs, Shopping, Statistics, Visa, bailout, economy

Visa has noticed the trend of increased debit card use during this recession. They’re running several TV ads that promote Visa debit cards for everything from buying pizza, going to an aquarium with your daughter on a Tuesday, and paying for products online.

On April 29th, Visa Inc. reported that their branded debit card total dollar volume of purchases surpassed credit card purchases for the first time during the last three months of 2008 – making the debit card transactions processed by Visa 50.4% of their total transaction volume in the same period.

It’s no mystery why consumers are turning to debit cards over credit these days. Consumers are becoming more conscious of their spending, and people don’t want to rack up any more credit bills if they can help it. Debit cards are popular over cash use, because American consumers have a preference for the convenience plastic provides – beginning in 2003, credit and debit card purchases bypassed cash and check purchases.

“A big group of consumers like the discipline that debit spending can bring them, and that is particularly relevant in this kind of environment,” said Tim Murphy.  Murphy looks after MasterCard Inc.’s main payment products.

Unlike credit cards, which allow consumers to charge more than they can afford to pay when the statement comes and carry the balance from month to month, debit cards only let you spend what you have in your checking account. A Nilson Report provides data for the increase of debit cards since 1987:

nilson

Banks are helping to encourage debit card use through the offering of rewards programs. While debit card rewards programs are not as generous as most credit card programs – it’s still a good incentive that helps people choose debit over credit. Credit card use is expected to decline even more, as Americans continue to monitor and rein in their spending habits.

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Date April 28, 2009

Credit Card Companies Cry Unfair

Category: Obama, People and Credit, credit card news, economy

President Obama has advised credit card companies that as President, he would be supporting stricter regulations on the credit card industry and its practices. Coming up in July 2010, tougher regulations on deceptive practices by credit card companies will go into effect. Consumer felt some relief but the credit card executives began to whine.

While many credit card companies are hard at work, raising customer’s interest rates at the drop of a hat or cutting credit from loyal, good-credit customers, the executives still feel as though they have been through enough already with the Federal government. They feel they have already had to work overtime to comply with the new set of rules, even if they don’t start until mid-next year. They also complained because so many customers are defaulting on their contracted financial obligations because consumers are facing job loss and the inability to survive from paycheck to paycheck. They reason that by raising interest rates of the “good” customers, they can make up for the loss from the credit_card2amount of defaults. These executives conclude that what they are doing will help to keep them in business.

Luckily, President Obama wasn’t in agreement. Instead, Obama reasoned that there needed to be more consumer protection while still enabling the credit card companies to make a profit. The new rules will certainly benefit credit card holders for many reasons. One of the major changes will dictate that the credit card companies can no longer raise the interest rates on any existing balances. Late fees can also not be charged unless a reasonable time has passed before a credit card holder hasn’t made a payment. It is these practices that are now taking place that are leaving more consumers struggling with credit card debt.

Essentially, the government wants to help rehab the relationship between the consumer and the credit card issuers. There will be the need for clearer agreements the average consumer can understand in an effort to prevent unknowing applicants get taken advantage of by big business. The President wants the situation to be fairer for all involved and the new regulations for 2010 should be a good start.

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Date April 25, 2009

Canadians Looking to New Credit Card Rules, Too

Category: Credit Card Management, Credit Score, Money Management, Obama, People and Credit, bailout, credit card news, economy, payment systems

Americans aren’t the only ones dealing with credit card problems. While President Obama met with executives from flagscard issuers including American Express Co. and Bank of America Corp. to review credit-card policies for fees and interest rate limits, the Canadian government Prime Minister Stephen Harper is responding to consumer groups and lawmakers who insist the banks should have lower rates, and more information for consumers for understanding how the credit cards work. Namely, consumers should know clearly what their interest rates are, and not be faced with interest rate increases for unknown reasons.

Finance Minister Jim Flaherty, will announce new rules for credit cards next week that will include regulations for issues that are unfair to consumers. Some of these changes will include a required 21 day grace period for all credit cards, which means that if the payment is sent within the 21 day window there is no interest accumulated. Currently, grace periods vary from one bank to the next. Banks and credit card companies will need to indicate clear interest rate change information – so that they’re unable to simply increase credit limits whenever they want.

“We have to make sure the system operates fairly, and everybody knows the rules,” Jim Flaherty said during an interview with Washington.

The Bank of Canada cut the overnight rate to a record low of .25% earlier this week, but most banks are charging almost 20% interest on unpaid bills which isn’t giving cardholders much needed relief from the interest-rate cuts.

Canadians, just like Americans, are living off credit cards more frequently than ever before. The neighbors to the north are also experiencing record numbers of people losing their jobs, and will be facing huge credit problems if the trends continue. Canadian bank credit card balances have increased from $41 billion from August of 2008 to $49.9 billion currently – which is an increase of almost 40% in a year’s time, according to a report by Deloitte.

According to Moody’s Investors Service, credit card losses rose to 3.1 percent of the average balances in the third quarter, which is the 7th consecutive period of increases. While still training the United States card losses of 6.6% of balances, the number is still too high.

Up to three parliamentary committees in Ottawa may be holding hearings on credit card and bank issues, with the committee reports being watched closely by Flaherty to determine whether additional governmental regulations will be needed.

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Date April 24, 2009

Chief Economics Adviser Gets Some Sleep During Meeting With President and Credit Card Executives

Category: Obama, bailout, credit card news, economy

In a meeting held in the Roosevelt Room of the White House with President Obama and credit card executives on summersweb1April 23rd, 2009, the chief economics adviser, Lawrence Summers was caught taking a nap at the table. Of course, the photographers had a good time with this, snapping pictures left and right of the man has he nodded off, holding his head on his hand and eventually sliding right off his hand before waking up.

Reporters all over the internet have also had a good time with the story, and comments from readers express outrage that in a time when the economy is doing so poorly and millions of people are wondering how they’ll keep food on the table our chief economics adviser is snoozing on the job. Some have gone as far as saying his ability to nap during the meeting just shows a lack of concern for American citizens – since Mr. Summers needn’t worry about where his next paycheck will come from.

The Caucus reported the story yesterday, with a couple of photographs, including the one seen here. While inappropriate to nap during a meeting, people should cut the man a little slack. The world happens to be in a major economic recession, and you can bet the chief economics adviser has been kept busy working with the President to come up with solutions to the troubled economy. Aides reported that Mr. Summers has hosted a number of midnight telephone calls, in addition to working the normal day hours – it’s human to become tired and need to sleep when the body and mind aren’t given enough time to rest.

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Date April 19, 2009

Dialing for Lower Credit Card Interest Rates

Category: Credit Card Management, Low Interest Credit Cards, People and Credit, credit card news, economy

Finance experts everywhere insist that you can often lower your credit card interest rates simply by calling and requesting a better interest rate or a modified payment agreement with lower monthly payments. While this may be possible for some people, many people who seem to need the slight financial break the most are finding it impossible to get a lower interest rate on their credit cards when they call and ask.

“I tried calling my credit card company for a lower interest rate. I was told they couldn’t do that and phone-and-creditthere was nothing they could do to help!” William Brewer of Oklahoma says.

If you try to call your credit card companies and the customer representative seems unwilling or claims to be unable to assist you – don’t give up so easily. Ask to speak to a supervisor, manager, or someone who IS authorized to consider the request for a lower interest rate or modified repayment terms. Remain polite, but be firm – the customer service representatives are likely reading from a script.

People who are most likely able to reduce their interest rates are people who are less likely to need it – those who haven’t missed any credit card payments and have a better than average credit score. Credit card lenders have an elaborate sharing system through their computers. They know what your FICO credit score is, they know whether you’ve paid your other accounts on time or late, and they know how much debt you’re currently carrying. The riskier you are, the more you would benefit from a lower interest rate to help get yourself back on track but the less likely a credit card company is to lower your interest rate when requested.

As the number of delinquencies and defaulted agreements increase, lenders are getting tougher and are unwilling to work with people. Unfortunately, raising interest rates on people who are already struggling to make their payments, or being unwilling to work out modified payment agreements in times of financial need doesn’t make it any easier (or possible, even) for some customers to make their payments and it seems the lenders are just shooting themselves in the foot by making it impossible for people to make payments.

If you do attempt to call your credit card companies to request a lower interest rate or modified payment agreement – do not mention the fear of losing your job as the reason for the request. That puts you in an immediate high-risk situation. If you’ve been making your payments on time previously, simply remind the company you’ve been a good customer and would like to remain their customer but are seeking the best interest rates – if they can’t lower your rate, mention you might transfer your balance to a competitor who can.

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Date April 16, 2009

Capital One Survey Shows Consumers Are Changing Their Spending Habits

Category: credit card news, economy

The United States recognizes April as National Financial Literacy Month. This is in an effort to highlight the importance of financial literacy and educate consumers on the importance of developing healthy financial habits.

Capital One, in recognition of Financial Literacy Month surveyed over 1000 American consumers to learn more about their spending and saving habits. The results indicate consumers are definitely making efforts to better manage their finances and save more money. The following results from the survey give an overview of the changing spending habits of American consumers.

  • Fifty percent of those surveyed have been clipping coupons to save money.
  • Fifty percent of consumers are canceling or postponing their vacation.
  • Sixty-two percent are cutting entertainment expenses.
  • Sixty-eight percent are not dining out as often.

This news is encouraging and indicates that American consumers may finally “get it” when it comes to the excessive consumerism that has taken over our society in the past few years. Unfortunately not all survey results are as positive. While most Americans are making temporary adjustments to their spending habits to survive the current financial crisis, other results indicate consumers are not really making the long term lifestyle changes required for financial security. 

  • Forty-seven percent of respondents are putting less money in their savings account.
  • Forty-one percent have reviewed their credit report, even though most of the respondents are aware they have access to a free annual credit report.
  • Twenty percent have never reviewed their credit report.

These results indicate that there is indeed a need to focus on financial literacy in this country as consumers continue to struggle with increasing the amount of money in their savings accounts. In addition to not increasing their savings, it would seem consumers are not taking advantage of reviewing their credit report. Your credit score is important in so many areas and the information on your credit report can affect your score. By not viewing your credit report you are unable to notice and correct erroneous reports or view activity that may indicate identity theft.

Americans must not only focus on the short term benefits of altering their spending habits but also recognize how the positive changes they implement now will have long term benefits financially. To properly manage your personal finances you need to not only spend your money wisely but also save and invest in your future.

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Date April 15, 2009

Credit Card Interest Dropped a Bit

Category: credit card news, economy

The annual interest rates of three of the more popular categories if credit cards have dripped a bit last week after two weeks of increasing rates. Overall, the interest rates for most credit cards remained pretty steady.

The two cards with dipping interest rates include the balance transfer cards which consumers are offered to aid in consolidating debt from other credit cards. The highlight of the balance transfer card is often a low introductory rate. Consumers take advantage of the low interest rates during the introductory period and pay off the balances before the regular interest rate returns to the account. This gives consumers the advantage of paying off credit card debt without incurring additional finances charges. The drawback is carrying a balance after the introductory period has ended. That rate was down to 13.13% on average, which is a marginal drop from the week prior’s average of 13.15%.

The other category of credit cards with dropping interest rates included the cash back reward cards which decreased from 13.86% to 13.83%. The cash back rewards cards offer consumers cash back in their pockets for each eligible charge put on the credit card. Consumers who utilize the credit card’s cash back rewards system often receive between 1%-5% back in cash based on eligible purchases made with the credit card.

Traditional low interest cards, which are reserved for consumers with very strong credit histories, still offer APR’s lower than the national average at 11.6%, leaving it unchanged from the week prior. Consumers are still struggling to contend with the changes made in the credit card industry, including the higher interest rates and reduced credit limits on their accounts.

The decline in interest rates is slight and does not offer much relief from the burgeoning debt by credit card users. It is becoming increasingly common for consumers to find themselves living off of credit cards as families struggle to survive through job layoffs and the economic difficulties the nation is still facing.

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Date April 11, 2009

Banks in Better Financial Position Want to Pay Back Government Loans to Avoid Restrictions

Category: Obama, bailout, economy

obamaOn April 3rd, President Obama came out of a meeting with senior economic advisers and said, “what you’re starting to see is glimmers of hope across the economy.” Banks that are now in a better financial position are looking to pay back the bailout loans they received in order to avoid the restrictions that are attached to that money – increases in executive pay, for one, and hefty premiums banks agreed to pay when they first received the bailout funds.

The Obama administration’s next step for fighting the recession is to complete stress tests of banking institutions – similar to the testing that took place with General Motors before the forced resignation of the chief executive. The balance sheets of the weaker banks will be examined over the next three weeks for “toxic assets”, like mortgages that no one is willing to purchase at this time. Banks are resisting this process because they will have to show big losses when they relieve their financial statements of deteriorating mortgages and mortgage-backed securities. Analysts have estimated that US banks have more than $1 trillion in mortgages on the books – but only a small percentage have been labeled as likely losses. Goldman Sachs economists estimate that banks are valuing their mortgages at an average price of 91 cents on the dollar – but this is much higher than investors would be willing to pay for them at this time.

Despite the resistance, senior officials are pushing forward with the plans as they are expected to prove pivotal for the next phase of the bailout effort. The new $500 bill to $1 trillion plan will make use of public subsidies to encourage private investors to purchase mortgage assets and help provide some economic relief.

The Treasury has plans to subsidize purchase of these “toxic assets” of mortgages and mortgage-backed securities with low-cost loans to buyers to help cover the upfront expense – but there is a large percentage of analysts that warn that most banks will remain reluctant to sell the assets and this becomes one of the Obama administration’s biggest challenges for pushing forward with this bailout plan.

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