A Blessing in Disguise

After years of perhaps, living beyond our means it is interesting to see that Americans are now beginning to cut back on their spending, paying off their debt, and putting a little more away in savings. This prompts the thought that maybe this economic meltdown is a blessing in disguise.

According to a study the average American is saving 20% more then just one month ago. In addition the amount of money people used to pay down credit card debt rose 6%. Financial responsibility, hopefully a trend that will be around for a while.

the Dow Dips Below 10,000

The credit crunch continues to be a big issue as the Dow drops below 10,000 for the first time in four years, and the problem isn't just as home. It is now having a greater effect on foreign markets as European Governments have begun bailing out their failing financial markets.

The Federal bailout seems to be a double edged sword for Wall Street as stocks faultered before and after the bailout plan was approved, now many on wall street are uncertain if the bailout plan will help them at all.

Mainstreet Will Feel the Hit

Most Americans may not feel the effects of crashing markets and waning financial systems, but it is coming. Those who are feeling it now are sub-prime borrowers, and those in the lower income bracket.

There are some effects you may feel soon; credit card companies are pulling in the reigns by increasing delinquency fees and by lower limits. Student loans are harder to obtain due to cuts in federal subsidies and many issuers have pulled out of this service.

Just because you haven't felt the credit crunch does not mean it's not coming your way.

High Interest Rates and Late Fees Pay Their Bills

Credit card companies are relying less and less on the borrower paying back the money owed as they use other ways to make their money.

One way they have secured a profit is by increasing interest rates. last years interest rates were at 19.1%, but just two years prior in 2005 they were at 17.7 percent. This difference adds billions of dollars to the pockets of the credit card companies.

They have also taken to increasing late fees. last year fees rose to $35. In 1994 they were less then $13. It seems as though it is time for a few federal regulations.

Putting a Stop to Abusive Credit Card Companies

Federal bank regulators have proposed a new set of rules for credit card companies in May, and hope to have something in the books by the end of the year. Until recently credit card companies have had free rein over their practices as they have engaged in abusive practices.

Under the new proposal the credit card companies would have to allow their consumers more time to make their payments, and would be given a limit on interest rates. The banks are adamantly against the proposed act, and have said they will campaign vigorously against the proposal. The Federal Reserve has stated that their goal is to allow consumers to be free of predatory practices. Hopefully this will be set in place before it’s too late.

Consumer Debt up 5.5% in 2007

Recent statistics by the The Federal Reserve show that Americans' consumer credit increased 5.5 percent in 2007, the biggest annual jump in three years. The rapid rise in credit was a further indicator that economic activity slowed significantly at the end of last year.

One of the factors leading to increased credit card spending was the slowdown in housing over the course of 2007. As banks tightened their mortgage lending standards, consumers unable to borrow money against their homes turned to credit cards. Analysts predict that the trend will continue in 2008 as increased unemployment, a falling housing market and slower economic growth force consumers to put more and more purchases on their credit cards.

Mortgage Meltdown Affects Your Credit Card

According to USA Today, banks such as Chase, Citigroup and Bank of America are boosting interest rates on credit cards in an effort to make up for the money they are losing on bad mortgage loans, even as the Federal Reserve continues to slash rates.

"Advocates say they fear that as employers shed jobs and housing values sink, more people will see their credit card rates raised to as much as 32%.Such penalty pricing can kick in if consumers pay late by just one minute or exceed their credit limit once. "

To protect yourself, please make sure that you are reading the fine print on your credit card statements. Banks are typically required to inform consumers of generally "material" changes in terms, such as interest rate, but too often consumers are unaware of how much they are actually paying in interest until it is too late.