The Federal Reserve figures, part of their latest Statistical Release, are accurate to April 2009 and show a 7.5% overall annual decrease with revolving credit decreasing at an annual rate of 11%. In hard cash terms revolving credit was down, from the previous month’s figure of $939.6 billion, to $931.00 billion.
In their analysis of the statistics, US brokers, Wachovia Economics Group argued that the steep drop was due to consumers cutting back sharply on purchases. They also speculated that with unemployment at record rates and the criteria for credit tightening, consumer spending would remain low.
Credit Card Spending
While there is an acknowledgment by some authoritative sources that consumers are reining in their credit card spending, others introduce a note of caution. “ Some Americans don’t seem to understand the errors of their past ways. The nation is still deeply indebted to credit card companies…” (Forbes.com May 20, 2009).
Credit Card Legislation
Recently introduced credit card legislation, The Credit Card Accountability, Responsibility and Disclosure (CARD) Act 2009, has allowed a fairer system of interest and penalty charges which will see a reduction in the monthly bill for many credit card users.
While this legislation is welcomed there is much more consumers can do to keep control of their credit card spending. By understanding the differences between the various types of credit cards and how these differences affect interest rates and charges, consumers can save themselves money.
Best Credit Card Deals
The Federal Reserve Board offers some excellent advice, which allows consumers to choose a new card wisely in order to get the best credit deals:
The first question for anyone applying for a new credit card is, quite simply, how is the card going to be used? Now that might seem to be a rather obvious question but consider this:
- Is the monthly bill always going to be paid in full?
- Will there be times when the balance is carried over?
- Are the free air miles or other’ gifts’ of any use?
- Is the card going to be used as a balance transfer card?
- Is the cash advance feature important?
- Is it a 0% interest credit card?
Once these questions have been answered it’s important to recognize that a credit card can have various Annual Percentages Rates (APRs). For example different rates for purchases, cash advances, balance transfers and penalty payments.
While this advice only scratches the surface the Fed offers much greater detail. For example:
- How is the finance charge calculated?
- What are the fees?
- What are cash advance features?
- What kind of card is it?
- Does the credit card offer incentives?
Before applying for a card it’s a good idea for consumers to check out their credit report. Each of the credit reference companies that operate in the US, Experian, Equifax and TransUnion, have to provide people with a free copy of their credit report once every year, if asked for it. It’s an ideal opportunity to rectify any incorrect information before applying for new credit.
Credit Dispute
Advice about how to initiate a credit report dispute is available from TransUnion, Equifax and Experian credit reporting agencies.
This article does not constitute financial advice.
Sources:
Federal Reserve Statistical Release, Consumer Credit, June 5, 2009
Federal Reserve Board, Choosing a Credit Card, September 25, 2008
Yasmine Kamaruddin, Consumer Credit Plunged in April, Wachovia Economics Group website, June 5, 2009
Lauren Sherman, Worst Cities for Credit Card Debt, Forbes.com May 20, 2009
White House Fact Sheet, Reforms to Protect American Credit Card Holders, May 22, 2009
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