Credit Cards » Credit Card News » Interest Rates On The Rise, Debts Decline For Credit Cards
Date July 13, 2009

Interest Rates On The Rise, Debts Decline For Credit Cards

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%.

Interest Rates On The Rise, Debts Decline For Credit CardsThe 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.

Date May 29, 2009

College Students and Credit Cards

According to a recent study, college students comprise one of the many groups of cardholders that have been hit the hardest by credit card debt.

College Students and Credit CardsAccording to a survey by Sallie Mae, a lender focusing on student borrowers, this April of 2009, college students on the average own four credit cards or more. Most college cardholders are also not very good at keeping up with their monthly payments. A majority of college cardholders regularly get hit by large monthly finance charges because they can’t pay their monthly credit card bills, according to the survey.

Most worrying of all is the steep rise in the median credit card debt amount of freshmen college students. Whereas the median amount was at $373 during 2004, now it is at $939. This means that even while they are still starting out in college, students are already getting buried in debt. If they are not able to recover, these college students will most likely carry large debts once they graduate. This could be a heavy burden for them, especially when they are just starting out with their careers.

College students are often one of the most active consumers that credit cards have. Although most of them rarely charge big ticket items, smaller purchases do add up to become large debts. The availability of student loans has also recently dried up, forcing many students to use their credit cards for many college expenses. Credit cards are also readily available for college students. They also offer many attractive incentives and freebies. Some credit cards even have arrangements with a few colleges for marketing purposes.

Many observers see that the lack of essential financial education among college students is the root cause of the problem. College students are also not the only sector of the overall population of credit cardholders who need some financial education, judging by what recently happened with the economy.

Using credit cards is not problematic, per se. It only becomes a problem when cardholders do not keep up with their monthly payments. There are many reasons why this may happen. One of the most common is cardholders charging items on their credit cards without really considering if they can pay them off or not when the monthly bill comes.

Because of the bad press that credit cards are getting, some people are turning to debit cards. However, debit cards also have pitfalls. One of the worst pertains to overdraft charges. Overdraft charges happen only with debit cards that include overdraft protection, usually debit cards connected with credit cards. Banks charge $34 on the average for debit card overdrafts.

Date May 28, 2009

Choosing a Credit Card When You Have an Excellent Credit Score

Like most things, a credit card can both be your friend and your foe. If you are not very good at balancing your finances and paying off your monthly credit card bills, then you may be having debt problems right now. However, if you have kept your finances up to date and you have no outstanding debts, then you might be one of the few who are heaving a sigh of relief over your financial standing, considering the economic situation right now.

credit-scoreIf you are good with your finances, chances are, you will have an excellent credit score. As anyone who keeps track of their finances would know, your credit score indicates how financially responsible you are. For creditors, people with high financial scores are the ideal customers. Keeping this in mind, you should therefore ditch your credit cards that are not offering you the best service when it comes to credit. Shop around for a better deal. Here are a few tips that you can use.

Fees and Interest Rates

If you are using a credit card that imposes fees on you, give it up. As a consumer with a high credit score, you are an ideal customer for most credit card companies, especially during these troubled times. Do not bring your business to a credit card company that has you paying for a service that is offered free by other credit card companies. Do not worry; you will not be exchanging fees for service. Credit cards that carry no fees are just as good as credit cards that carry them.

You would also want to choose credit cards that offer low interest rates. Do not be fooled by low starting interest rates. Some of these rates can skyrocket the moment creditors feel they can get away with it. Good credit standing should make good interest rates much easier for you to get.

Points and Incentives

As a savvy credit cardholder, you might be wary of the points and incentives system of credit cards. They are obviously just another gimmick of the credit card companies to get you to spend more. That may be but the fact remains that earning points whenever you use your credit card is a great way to get something back every time you put money out.

Incentives are also another great way to get something extra out of your credit card spending. Try and align the incentives to something that you use every day. For instance, a credit card that gives fuel purchasing incentives might be good for you if you drive to work daily.

Date May 22, 2009

Credit Card Bill Passes

The highly popular credit card bill has finally passed from the Senate with a vote of 90-5. Earlier, the senate had promised that they would get the bill ready for the President’s desk by Tuesday and they have delivered.

Credit Card Bill PassesThe credit card bill of the Senate aims to correct many credit card industry practices, which consumers have found to be unfair and deceptive. Among many things, it will stop the industry practice of arbitrarily raising interest rates and requiring disproportionately large fees, requiring the industry to issue advance notices for interest rate changes and controlling “over limit” transactions as well as the fees involved.

The bill will also address the controversial “universal default” practice of credit card companies. This will stop credit companies from raising the interest rates of cardholders when they are late on a separate, unrelated debt.

Under the bill, credit card companies will also have to follow strict guidelines for marketing to college level consumers, addressing the increasingly problematic debt problems of college students.

The credit card industry is naturally against the credit card bill. They have stated that the bill may dry up the available credit for consumers. The industry has also stated that when the bill is implemented, they will have to recoup their losses through other means. This will probably mean an increase in annual fees and cutting back on the reward points system, such as the frequent flier points system.

Scott Talbott, lobbyist of the industry trade group Financial Services Roundtable, said that, “The restrictions on pricing imposed by the credit card bills will result in changes elsewhere, including a return of annual fees and a termination of rewards programs. Those who manage their credit well will be subsidizing those who don’t.”

The debate over the credit card bill has gone on for several months and during its debate, the banking and credit card industry have found themselves to be completely helpless. It is interesting to note that the banking and credit card industry have usually had a large influence in Washington. This time around, they became the target of constant criticisms from the Senate, with their abusive and deceptive scrutinized and questioned.

The credit card bill is also notable for one other thing. It is one of the rare bills that enjoyed bipartisan success, which is more notable considering what the political climate between the democrats and the republicans has been this year.