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June 14, 2009With employment problems and a struggling economy to deal with, more and more American consumers are seeing their credit cards as their last life line. Unfortunately, as credit debt problems continue and credit companies try to secure their future profitability when the credit card bill comes into play, credit is drying up at an alarming rate.
Equifax, a company specializing on providing credit data to credit companies and similar companies recently released data showing that access to credit cards have considerably diminished. Charge limits for existing credit cards have lowered significantly as well.
According to Equifax’s data, the number of credit card accounts in the U.S. was 365 million accounts for last month. In comparison, the number of accounts in June last year was at 440 million accounts. Credit card companies have also drastically reduced the available credit, withdrawing more than $600 billion in available credit during the past year alone. In May, the available credit stood at less than $3 trillion.
While diminishing available credit, credit card companies are also lowering their risks on existing credit cards. Credit card balance limits are being lowered and balance chasing is beginning to be a real problem for credit cardholders. Credit card companies are also applying stricter rules on who can avail of credit cards.
Credit card companies are hoping that, by limiting available credit, they can minimize their exposure to risk and recover from the damage caused by the increasing number of delinquencies and defaults. However, judging by the numbers provided by Equifax, delinquencies still continue to rise. Last month, the figures for delinquencies in the U.S. were at 4.79%. Delinquencies have been on a steady rise for the past four years. Compared to figures from 2005, the delinquency rate has almost doubled.
As this continues, consumers are losing out on what is possibly their last financial lifeline, their credit cards. Even more worrying is that when the credit card bill becomes active after a few months, credit is going to be even more difficult to get.
Dann Adams of Equifax stated, “The last lifeline for many consumers is their credit card, and that lifeline is getting shorter”.
Still, there may be some respite from the continuing credit crisis. According to Equifax’s figures, while the delinquency continue to rise, the pace has slowed somewhat. Adams said that mortgage delinquencies may be on the verge of peaking.
“We’re hopeful we’ve seen the bottom and are setting the stage for a recovery”, Adams said. “You don’t see it in the numbers quite yet”, he added however.
Getting rid of debt is, without a doubt the first step for anyone who wants to balance out their finances. The monthly interest and penalty fees by themselves can already ruin a budget. There are many ways to get out of debt. Consumers usually go with the “do-it-yourself” or DIY approach. However, there are many things to be said about seeking the help of professionals. While a DIY approach can work, a professional often has more experience and access to information and resources that a normal consumer does not have.
If you find yourself in heavy debt, panicking is probably the worst thing that you can do. So, first relax and take a deep breath. Remind yourself that it is not the end of the world and you can get over it, with a bit of luck and a lot of hard work. Now you’ve probably researched a lot on how to get out of debt and have run across these two words: “debt consolidation”. If you’re thinking about using this to help you get out of debt, then read on.
If 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.
The 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.
It might seem like the bank is playing the fool but, in reality, this practice is the direct result of banks wising up over the years. In the past, banks would most likely have cut you off if you overdrew your account. Nowadays, they let it through because they’ve learned that they can earn more by charging you special fees for overdrawing your account.
Credit Cards and Debt
If you are one of the many Americans who have found themselves having to deal with large debts, then you probably have given some thought on getting help from debt settlement companies.
Like any problem, to begin fixing your credit card debt problem, you first need to determine how big the problem is. Unfortunately, some people are not very clear about the details of their credit card debt. Understandably, some people find rummaging through all the fine print and the mathematical confusion that credit card bills carry to be too daunting. However, you will never truly understand why your monthly payments are as high as they are unless you understand the details of your credit card.