The holidays have come and gone, and despite a recession there are millions of homes receiving credit card statements with higher balances. Many gift purchases were charged even though families were struggling to stay ahead of the debt in place before the holidays started.
Making the situation worse this year is the fact that most of the credit card companies are raising interest rates and fees ahead of the new Credit CARD law to take effect on February 22. The new law limits when the credit card companies can raise interest rates and fees so the banks are making sure they are positioned where they can collect higher rates after the law takes effect.
Those Christmas purchases are now going to cost a lot more and the goal, according to financial planners, should be to pay off those credit cards as quickly as possible. The New Year is traditionally a time to make resolutions and review financial status. Already into the middle of January, it is an excellent time to look at current debt status with a critical eye. One of the steps many consumers are taking is reviewing the previous year spending patterns before evaluating ways to consolidate current debt. Even better than consolidation is paying off debt whenever possible.
The reason spending patterns are reviewed first is because some consumers borrow from one source to pay off credit card debts only to create new balances again through overspending and charging. But the new interest rates and fees that credit companies are charging are proving to be exorbitant. Even people with excellent credit scores are getting notification their interest rates are going up as high as 26% and sometimes higher.
Financial planners recommend that consumers pay off the credit card debt as quickly as possible. Credit card companies have lost billions of dollars as the recession lingers on and now they are faced with tougher federal regulations on rate changes. It is not surprising these companies are looking for ways to preserve revenue.
It is surprising though that many consumers charged their Christmas purchases despite the recession. A better plan for the New Year is to buy Christmas gifts throughout the year and avoid charging any gifts in 2010. The author of “Life or Debt 2010” is Stacy Johnson. He points out that, “Banks and credit card companies aren’t your friends.” That can be hard to remember when reading the nice advertisements that come with the cards claiming to help consumers manage their expenses by supplying credit.
The exorbitant interest rates are not being well received by consumers or Congress. There has been discussion about moving up the start date of the new Credit CARD law though implementation is only five weeks away now. But consumers can take charge of their spending habits and debt right now. Paying off the credit card balances is the first step. The second step is making sure spending is managed in a way that reliance on credit cards to balance budgets is minimized.
Tags: holiday purchasesRelated Posts
- Using Debit Cards Can Be Risky Business Summer 2007 may be remembered in economic circles as a time when new concerns were voiced about those handy debit cards that are appearing in just about everyone's wallets. Research indicates that consumers are often opting to pay for their purchases
- Mortgage Rates Have Once Again Fallen The financial situation for banks continues to be volatile, and the situation they face has caused them to reduce their mortgage rates again, for the sixth consecutive week. Now, the rates sit at their lowest level in over several months,
- Mortgage Rates Hovering at 5.25 Percent When it comes to debt management, one thing a lot of people have trouble with is the concept of debt vs investment. One reason for this might be the traditional terminology of bad debt and good debt. Certainly, this is
- Fed Cuts Interest Rates Once Again The Federal Reserve Board has once again tried to ignite a sputtering economy by cutting interest rates. The Fed has decreased the federal funds rate, the rate that banks charge each other for overnight loans. The rate cut marks the third one
- Subprime Mortgage Mess Takes Toll on Investors The subprime mortgage mess is taking its toll on the nation's investors. Financial experts say that fixed income investors have seen their share of losses this year because of the precipitous decline in the subprime mortgage market. At the same
- Mortgage Modification Program Reports Higher Rate of Success The mortgage modification program has been under fire over the last few months because of the small number of people actually helped. That seems to be changing as the U.S. Treasury department reports that 947,000 people have seen their mortgage
Recent Comments