Credit card default rates leveling off

The percentage of Americans falling behind on credit card bills stabilized in January, according to data from the six major lenders, signaling that U.S. consumer credit woes may be leveling off, reports the Reuters.

Bank of America Corp and American Express Co reported drops in both credit card delinquency rates and in charge-offs. Capital One Financial Corp, Discover Financial Services, JPMorgan Chase & Co and Citigroup Inc also posted delinquency rates for January little changed from December.


Charge-offs were mixed in January. The January data, while not uniform, follows a December that also showed signs fewer Americans were falling behind in payments. It continues a reversal from November, when most companies reported a rise in charge-offs, which reflect stress on consumers.

The delinquency rate at Bank of America was 7.35 percent in January, down 0.09 percent from 7.44 percent in December. Its charge-offs dipped 0.28 percent in the same period.

American Express said its delinquency and charge-off rates each fell by about 0.1 percent in January, compared with December.

New credit card rules go into effect on February 22

Big changes are soon coming for the credit card business. Next week new credit card provisions from the 2009 Credit Card Accountability, Responsibility, and Disclosure Act (CARD) will take effect, making it easier for consumers to understand their credit card bills and how interest charges are determined.

The biggest new change is the end of any-time, any-reason rate hikes on the money that you have already borrowed.

Interest rates will now only be able to go up for three reasons: if you pay 60 days late, if your promotional rate expires or if you have a variable rate (with which the rate can go up and down).

Consumers now have 21 days to send their payments in instead of 14 and credit card companies must give consumers 45 days notice if their terms change, instead of 15 days.

And your due date won't change around during the month: it'll stay on the same day. This new improvements will make it easier to pay on time

However, banks can still raise your minimum payment or cut your credit limit.

The new law will require young people under age 21 who have no independent source of money to have a parent, guardian or spouse co-sign their credit-card applications.

Consumers see their interest rates rising

According to the latest Rasmussen report (rasmussenreports.com), 50% of respondents have seen their card interest rates increase in the past six months. And the number really might be even higher, as an additional 19% weren't sure whether their interest rates have gone up. This speaks to the complaint that banks have been raising interest rates in response to last spring's credit card regulatory changes.

The poll also found that Sixty-nine percent (69%) of adults say an increase in the interest rate on a credit card makes them less likely to use that card.

51% of adults say they pay their credit cards in full each month, thereby avoiding any interest payments. However, nearly as many (45%) say they sometimes carry a balance on their cards.

Credit card reform passage urged by the President

According to a Reuters report, President Barack Obama, pronouncing credit card industry abuses had of the present recession, urged Congress on Saturday to approve new laws to halt sudden rate hikes unfair penalties and hidden fees.

"Americans know that they have a responsibility to live within their means and pay what they owe. But they also have the right to not get ripped off," Obama asserted in his weekly radio address.

"Abuses in our credit card industry have only multiplied in the middle of this recession, when Americans can least afford to bear an extra burden," he revealed, calling on Congress to send him a bill he could sign by the Memorial Day holiday on May 25.

Obama's remarks came as he tried to step up pressure on the possibility to pass a credit card reform bill. The House of Representatives has already passed a measure and the Senate could take up its version as early as next week.

The White House said on Fri. that Obama would hold a town hall gathering in Albuquerque, New Mexico, next Thu. that would likely deal with card issues.

Obama discussed his concerns about credit card abuses with industry leaders who were invited to take part name brands There are a White House meeting on April 23.

Senate Majority Leader Harry Reid asserted on Thu. that Democratic and Republican leaders of the Senate Banking Committee had worked out language on credit card legislation.

The legislators have been negotiating over issues like the ability of issuing banks to reflect an individual's risk when setting interest rates.

Banks such as Bank of America, JPMorgan, Citigroup and Capital One face a new set of Federal Reserve rules aimed at reining in abusive credit card practices.

The rules are to be implemented by July 2010, a date some U.S. lawmakers and consumer groups complain is too far away to help struggling consumers. Lawmakers are trying to codify those rules in legislation.

"It is past time for rules that are fair and transparent," Obama said in his speech. "Instead of an 'anything goes' approach, we need strong and reliable protections for consumers.".

For more news on credit cards, visit Credit Card Consumer Guide.