August 18, 2010
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News: What Credit Card Companies Don't Want You To Know
The sudden market crash and housing market crisis left many Americans without jobs, unable to sell their homes, and buried in credit card debt trying to manage day to day expenses. The scare which sent millions of homes into foreclosure and thousands more Americans into bankruptcy has fostered a renewed interest in reducing credit card debt. While Americans take control of their finances and continue to lower their credit card debt, the card networks and banks are not so thrilled. You might think paying off debt should be hailed by most companies; it remains quite the opposite for Visa, MasterCard, and card issuers.
As credit card debt falls to an eight year low, Visa, MasterCard, and card issuers have become increasing more concerned about decreased earnings from interest and fees. Visa and MasterCard have the greatest to lose as most of their earnings are generated from credit card transaction fees. While the big networks' stockholders' concerns grow, the U.S. economy and unemployment situations continue to improve. Reducing card debt is also good for the housing market which has yet to bounce back which could give consumers more confidence in taking on additional mortgage debt.
Analysts say that before the economy completely recovers and unemployment drops to manageable levels, Americans need to increase spending. However, as an individual credit cardholder, it makes more sense to reduce debt and sock some extra money into savings; most likely an attitude that many consumers share. Likewise, carrying more than one card can only add more temptation to spend on needless items. Therefore, although closing additional card accounts may lead to a temporary lower credit score, it has the potential to bring families to a healthier financial life. If consumers truly want to become savvier with managing their finances, cards are best used for emergency situations and balances paid off in full each month.