August 24, 2009
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News: It's Official; CC Rates Escalate
Over the past several months, Americans have felt helpless as they witnessed unfavorable changes in their credit card account's interest rates and terms. Lenders have consistently defended their actions saying they are simply responding to the market environment. Contrary to what the financial industry would want Americans to believe, they are making millions off of our nation's credit card debt. According to a study conducted by the Pew Safe Credit Cards Project on the nation's top 400 card issuers, the median lowest card interest rate offered, increased nearly 20% during the first and second quarter of 2009. Furthermore, banks profits from card debt increased a whopping 46%. Pew Safe is a consumer advocate for the protection of Americans against predatory actions of the financial industry.
While Americans were suffering from the affects of a housing market collapse and high unemployment, the study found that major credit card companies were borrowing from the Federal program at a reduced interest rate. A fact that will be difficult for Americans to accept in view of the fact that during the first half of 2009, lenders tacked on an additional 8.74% to credit card interest rates paid by the consumer. A significant increase from the 5.99% added charge in December 2008. How does a lender truly justify what most would consider criminal? Those who support such action say banks are responding to the large losses to their balance sheets as card debt defaults rose from 6.4% at end of 2008 to 9.55% for the first six months of 2009.
The new credit card reform act will give Americans the option to reject these unfair interest rate increases; however, there is a catch. The consumer must agree to shut the account off to future use and is given up to five years to continue to pay the account off as previously agreed. Almost sounds fair; but is it?