Plunging consumer credit spawns deceptive new credit card fees

Consumer credit dropped in May further than was forecast, with the decline being led by significant drop in credit card debt. Credit card delinquencies fell to their lowest rate since 2002. As Americans save more and borrow a whole lot less, desperate credit card companies are coming up with new solutions to gouge customers. New credit card rules aimed at curbing the usurious behavior of credit card companies may be giving consumers a false sense of security.

Resource for this article: Plunging consumer credit spawns deceptive new credit card fees by Personal Money Store

Consumer credit drop exceeds forecast

A Federal Reserve report released Thursday showed that much consumer credit dropped at a rate of 4.5 percent in May--the fourth consecutive month of declining credit. Revolving debt, which involves credit card debt generally, dropped by 10.5 percent ($ 7.3 billion) in May, according to the Fed's report. In May, non revolving debt fell $ 1.8 billion. It was reported by Business Week that economists' projections in a Bloomberg survey ranged from a decrease of $ 5.2 billion to an increase of $ 2 billion in May. Consumer credit has increased only twice since the end of 2008. Consumer spending, which accounts for about 70 percent of the economy and is what America is counting on to revive the economy, will be weak as Americans pay down their debt.

Credit card delinquencies drop as well

Right now, credit card delinquencies are declining with consumer credit. The American Bankers Association (ABA) reported that late payments for bank credit cards fell in the first quarter to the lowest level in eight years. As outlined by Market Watch, bank card delinquencies--card payments at least 30 days overdue, fell to 3.88 percent of all credit card accounts within the first quarter, in contrast to 4.39 percent in the fourth quarter of 2009. Since 2002, the credit delinquency rate has been the lowest. They also said that overall consumer loan delinquencies declined, but only job creation will bring further improvement.

New credit card rules are to be broken

Revenues are declining for credit card companies. But even with new credit card rules intended to protect consumers going into effect next month, credit card companies are trying harder than ever to burn customers with creative new fees. CNNMoney.com reports that banks will be able to get around numerous of the new rules. New rules cap late fees at $ 25 and do away with inactivity fees, but now more credit card companies are charging annual fees.

Companies for credit cards hope you won't notice

When it comes to the new credit card rules, consumers think that credit card companies can't possibly raise interest rates on existing cards anymore. But they can do anything they want with new balances, as long as they give 45 days' notice. If your credit card company sent you a letter a when back and you see your interest rate skyrocket on your latest charges, that's what happened. Plus, credit card companies can nevertheless cut credit limits and close credit cards without advance notice, which will really hurt a credit score.

Instantly open credit card mail

Other credit card companies just lately hiked balance transfer fees, cash now fees and also foreign transaction fees. Gerri Detweiler, who is the personal finance advisor at Credit.com, told CNN that read the mail you get from your credit card company is more important now than ever. Do not assume its junk mail, because you're only going to have the 45 days to opt out if you actually read the fine print. And as all of the credit card companies become more desperate, they'll not only raise existing fees but create all kinds of new fees.

More data about this topic at these websites:

Businessweek.com

businessweek.com/news/2010-07-08/consumer-credit-in-u-s-declined-more-than-forecast.htmlv

Marketwatch.com

marketwatch.com/story/credit-card-delinquencies-fall-to-8-year-low-aba-2010-07-07?reflink=MW_news_stmp

CNN Money.com

money.cnn.com/2010/06/30/news/economy/credit_card_act_new_rules/index.htm?postversion=2010063007