Credit Cards » Credit Card News » Credit Card Companies Putting The Squeeze On Consumers
Date July 7, 2009

Credit Card Companies Putting The Squeeze On Consumers

As the economy continues to remain weak, American consumers are becoming more and more desperate on where to turn to for financial security. Job security is also at an all time low, with unemployment at an all time high. Because of a drastically decreased monthly income, more and more consumers are now forced to rely on credit instead. Unfortunately, credit card companies are currently engaged in putting the squeeze on credit and, as a result, on credit card users.

Credit Card Companies Putting The Squeeze On ConsumersWhen the economic crisis came, credit card companies were hit very bad. So bad that many were facing bankruptcy before the government bailed them out -with money from the American taxpayers. Barely recovering, credit card companies went on a campaign to minimize their exposure to risks as much as they can. Credit card holders began experiencing drastically reduced amounts of credit and very high interest rates and fees.

Last May, the government signed into law the credit card bill. The credit card bill is a set of legislation which aims to level the playing field for credit card holders by getting rid of the many predatory practices of credit card companies such as arbitrary interest rate and fee changes, offering credit to high risk borrowers and deceptive and hard to understand billing and contract language. With these changes in place, credit card companies foresee that they will be experiencing a drastic cut in profits, far lower than they were able to generate in the past few years before the economic decline.

While the credit card bill is not set to become active until the first quarter of next year, credit card companies are already changing their business practices to prepare for the bill. Currently, credit card holders are seeing their interest rates soar even higher. They are also beginning to see their credit limits being cut down to almost useless levels. Fees and charges for credit card transactions such as balance transfers, over the limit charges and even merchant charges are also increasing rapidly.

These drastic changes are being implemented not only on borrowers with low credit scores but also on those with very good credit scores. As a result of these changes, credit card holders are finding it very difficult to keep up with their balance payments. What’s more, their credit scores are also getting hit hard.

It is fairly obvious that many of these changes are being made by credit companies in preparation for the upcoming credit card bill’s activation. Therefore, these changes are probably for the long term.

Date May 9, 2009

Consumer Borrowing Falls, Smart Spending is the Order of the Day

Consumer Borrowing Falls, Smart Spending is the Order of the DayThe economic recession, the rise of unemployment, and the fall of the property markets have hit the country quite hard. For the average American, the reality has been rising loan rates, the risk of losing homes, and the threat of unemployment. As a result, every American has had to rethink the way they spend their earnings.

Today, Americans around the country are moving away from their old, consumer-driven spending habits. The order of the day for most Americans is now spending smart. It seems that frivolous spending, a common practice just a few years ago, is now on the way out.

Paco Underhill, an expert in consumer psychology, has stated that the consumer mindset is undergoing a major change due to the recession. He was recently quoted saying, “Our retail culture is in a major transition. Conspicuous consumption is now bad manners. Too many of us have spread ourselves far beyond our means. We can’t do this anymore.”

“Our closets are full, our houses are too big, we have too many cars. It’s time to make some very wrenching changes,” he further elaborated.

It seems that American spenders are doing just that. A report released by the Federal Reserve last Thursday shows that consumer borrowing dropped to $11.1 billion this March. Reuters had earlier polled industry analysts who had expected consumer borrowing to drop to $3.5 billion for March. The annual rate of consumer credit fell to 5.2% this March. This totals $2.55 trillion. Not since December 1990 has consumer credit percentage dropped so low.

The drop in non-revolving credit was to the tune of $5.7 billion, which is equivalent to a 4.2% rate, to $1.6 trillion. Non-revolving credit encompasses closed-end loans, such as those taken out for holidays, cars, boats, and college educations. On the other hand, the drop in revolving credit in March was at $5.4 billion, which is at a rate of 6.8%, to $946 billion. Revolving credit is composed of borrowings from credit cards and charge cards.

The sales figures of major retailers for April are also quite telling. Discount stores and supermarkets are winning out against their more high-end competitors. From food to clothing purchases, most Americans are moving towards where the best value is. Consumers are beginning to recognize the importance of holding on to their dollars and are being very careful in their spending. As a result, previously scoffed at buying practices such as buying pre-owned items and “private label” store products are becoming more and more the norm.

The appeal of high priced, luxury branded goods is also beginning to wane.
The changes in buying behavior have its positive and negative effects. Some retailers, for example, are being hit by the change in consumer practices. Clearly, they will have to adapt to this new consumer behavior trend or risk losing everything.

Date April 22, 2009

New Study Shows Americans Fear Credit Fraud Most

While many Americans are struggling to survive during an economically trying time, many consumers may be credit-signsurprised to learn what they fear most. Beyond the concerns of war, acts of terrorism, and health crisis on the rise, it a legitimate fear of credit card fraud. Research conducted in early 2009 indicates that as many as 68% of the 1,000 respondents surveyed have a greater fear of being the victim of credit card fraud and having someone access their credit or financial information than of any other problem currently spotlighted in the world today.

As technologies develop and people are required to keep up with the times, credit fraud is a very real danger. So many consumers are already working to pay off their debts and improve their credit rating but at the same time, know they must continue to protect their information and not become a victim of fraud. Knowing that one breach of financial information can cause disastrous results for your own credit, consumers are stressed about staying diligent regarding their credit.

According to the company,Unisys Securities, that conducted the survey  found that “Adults in the U.S. are most likely to worry about fraudulent use of their credit and debit cards and identity theft. Americans are least concerned with their personal safety”. Younger Americans are less concerned about personal and financial safety and indicate they are most concerned with meeting their personal financial obligations. Older Americans (65+) are less concerned with online financial safety because it is likely less of that age category do not shop online or use the internet for other financial transactions. It is the middle-aged American’s who concern for credit card fraud is at the highest.

Fearing credit card fraud is a reasonable concern and consumers need to be aware of what security risks are implicated each time a credit card is used or financial information is supplied for services, such as a loan or other transaction.