Consumers Finding Relief

© Gail Cavanaugh

Apr 10, 2009

Consumers have been complaining for a long time about the rates they pay on their credit cards. As a result, the Federal Reserve Bank cut interest rates in February 2008 intending for consumers to benefit by having the interest rate on their credit cards reduced. Instead, many consumers found their interest rate rising because the banks were trying to make up for losses suffered as a result of bad loans.

This action has caused Congress to pass an act to protect consumers against rising interest rates on their credit cards as a result of the economy. At the end of March, the Senate met and approved the Credit Card Accountability, Responsibility, and Disclosure Act which limits the rise in interest rates on credit cards. The already troubled banks have indicated that this act prevents them from charging an interest rate to reflect the risk involved.

The banks also complained that this act would raise the credit card issuers’ costs of doing business and would eventually reduce the amount of credit available to consumers. All of these actions are a result of the economic and the subprime mortgage crises. This is just one more area where consumers need to cut back. Learning to live on less credit will enable consumers to make more responsible choices in spending money.

Teen credit card debt has become a problem in recent years as they are bringing an average of $1585 in credit card debt to college, according to Nellie Mae. Teens have not been able to apply for a credit card under the age of 18 without parental consent, however, with the passage of this act, teens will not be able to acquire a credit card without a co-signer. It is questionable whether teens need credit.

Although consumers and banks feel there are disadvantages in the recent act, this may be what is needed to encourage responsible handling of money by consumers as well as responsible lending by the banks. The banks, eager for profits, have loaned millions of dollars to consumers who were not able to make the payments on credit cards. Consumers, eager for instant gratification, have borrowed excessive amounts of money which in some cases hurt their credit.

Whenever people have to change their behavior, there is a time when they have to adapt to the changes, but in the end, the change proves to be beneficial. Consumers need to stop spending money as they have in the past and banks need to be more responsible in lending money to consumers.

NH State House

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