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Credit card changes coming soon to benefit consumers

admin — Fri, 19 Dec 2008 15:54:29 +0000

The banking industry has caved into reforms on credit card regulations, rates and marketing techniques. In one of the most lobbied moves from consumer groups to try and ease up on predatory credit card lending practices. Consumers have been after the office Office of Thrift and Supervision to force banks to make changes into the perceived unfair lending practices.

Key changes that will go into effect in July of 2010 include the elimination of credit card companies ability to dictate payments being credited to balances with the lowest interest rate. Restrictions on a banks ability to retroactively raise interest rates or make changes to the card terms within the first year of issuance. All bills will need to be mailed 21 days prior to the due date. Eliminating a banks ability to charge retroactive interest will be one of the major changes with the new rules, and could end up eliminating upwards of 10 billion dollars in fees to the banking industry. There is an outside chance the government could look to introduce the consumers credit card bill of rights legislation when the new Congress is seated in 2009, which could further restrict the banking industry and credit card companies.

Credit Cards, Auto Loans could benefit from TARP changes

admin — Fri, 14 Nov 2008 17:39:06 +0000

Henry Paulson, the Secretary of Treasury recently announced that there would be changes to the $750 TARP package. The original package was designed and sold on the basis that it would be used to help purchase toxic mortgage debts from lenders and financial company portfolios to help free up the credit markets. The program quickly changed course as the U.S. followed the lead of many European countries who began to invest directly into banks to bring up there core capital ratios. This was considered phase one of the TARP rollout.

Phase two now appears to be directed towards consumer lending. Consumers have been directly impacted by the credit crunch as financing for auto loans, student loans, credit lines have almost all but disappeared except for borrowers with outstanding credit. The market for these consumer loans has seen the secondary marketplace disappear, resulting in limited funds available for consumers. The government believes that investing into these firms will help with more funds for student loans, credit cards, personal and small business loans, thus spurring consumers to begin purchasing and help the economy grow.

Credit card rates could move lower with another fed rate cut

admin — Sun, 26 Oct 2008 20:58:51 +0000

The FOMC meeting this week could add some needed relief for the average consumer. The negative news that has been flowing from news papers and media outlets have pushed the idea of a recession from a possibilty into a full blown reality.

Consumers who have credit cards that are directly tied into the prime rate should are likely to see an additional decline of 1/2 pt to their interest rates. The prime rate has dropped sharply in 2008 as the fed has moved to drop the fed funds rate to help unfreeze the credit markets, as the fed funds rate has declined lenders typically follow suit and lower the prime rate.

Not all consumers will benefit from the rate cut as card issuers often have floors tied into the rates they offer to consumers. This essentially means they reserve the right to have a limit to how low interest rates can move on their cards.

Lenders have pulled back sharply on the amount of offers they are now sending to consumers. The fallout in the credit markets has effected consumer loans, auto loans and credit cards as banks look to mitigate the risk in their credit portfolios.