The Bank Must Strive To Meet The Credit Card Holder S Needs

Category: Finance.

Owning a credit card is fast becoming a better deal for consumers as the credit card industry( banks and other credit card issuers) starts changing their practices and implementing what can only be construed as more lenient practices, under the pressure exerted by Congress.

In economic figures released by the Commerce Department at the end of May 2007, the U. This article offers the whole story. S. first- quarter gross domestic product( GDP) grew by 6 percent. Housing continued to be a drag on the economy and was though likely to remain so in the coming months. This was the weakest quarterly expansion since the fourth quarter of 2002 and was well under the 8 percent growth rate projected by Wall Street economists. However, there were positive signs as well, which could signal a healthier rate of growth towards the end of the year.

In a related report, the Labor Department reported on June 6 that U. One of these good signs was personal consumption spending- which powers two- thirds of the economy- increased by about 4 percent versus the 8 percent figure in April. S. worker productivity had also increased at a much slower rate than originally estimated. Most of the performance figures had already been anticipated. This report raised fears about possible inflationary pressures as labor costs go up. What came as a surprise was that borrowing by U.

This increase in consumer credit was the smallest monthly increment in seven months, since October. S. households had expanded by less than half( $6 billion) of forecast( $6 billion) as credit card use actually fell for the first time in 13 months. It seems consumers are pulling back from taking on more debt. The decline in revolving credit has been interpreted as a sign that consumers are paying off more of their credit card debt. Revolving credit, which includes credit cards, declined$ 403 million in April, the first monthly decline in the 13 months since March 200Consumers may be cautious about contracting more debt while housing remains in a slump and economic growth has been so weak. In the middle of these mixed signals from the various sectors of the economy, legislators have expressed their dismay over practices being followed in the credit card industry. Lawmakers subjected executives of major credit card issuing banks to intense questioning during the hearing.

The House Financial Services subcommittee hearings last Thursday, called for stronger, June 7 action by the Federal Reserve to control what lawmakers called the deceptive and predatory practices of credit card companies. Saying that the average American household carries$ 13, 000 in credit card debt and overall credit card debt runs in the hundreds of billions of dollars, the panel chairwoman Rep. Y. , was reported to have expressed fears" that we will see a perfect storm in consumer credit as these pressures converge on Americans, and that the ripple effect will be felt throughout our whole economy. " Maloney cited the success of credit cards in providing for the credit needs of the American consumer but also emphasized that with great success came" great responsibility. " Lawmakers think the Fed needs to do more to protect credit card users, and propose to give other bank regulators the authority to curb industry abuses, including policies that confuse consumers and push them into more debt. Carolyn Maloney, D- N. The Fed is requiring credit card companies to extend to 45 days the notification period to consumers before they implement any changes in the terms of an account. The Fed s proposed full disclosure requirements would, allow consumers a, among other things longer time to look for another credit card.

The present practice is that when banks want to make any changes, to increase interest, for instance rates or to impose a higher penalty rate for missed or late payments, they will give only 15 days notice. But legislators feel this is not enough and want regulators to impose an outright ban on abusive practices. Legislators are targeting other practices like charging interest on portions of debt that is paid on time during a grace period, and raising interest rates because a customer is late on payments to other creditors( not the credit card issuer) - which is termed" universal default" in the industry. They do not want to create new laws, but prefer to see regulators act on the problems. Legislation is being proposed that would make some of these practices illegal. Other regulators appear to agree with the lawmakers.

These are serious concerns being raised by our lawmakers. The Federal Deposit Insurance Corporation chairman is not fully convinced that problems regarding credit card industry practices will be resolved by full disclosure alone. Because of the close scrutiny by Congress, several major banks have started to temper or remove some of their most criticized practices. Other federal regulators who were also called to testify expressed support for legislation that would give their offices the authority to curtail practices that are deemed to be deceptive or unfair. Banks may need to do more to allay consumer fears, and eventually, suspicion, resentment. Already one of the major credit card issuers, has begun to, Chase articulate its response.

How banks will respond remains to be seen. The bank has issued a June 12 statement saying that in their view the complex credit card system that exists today will be able to sustain its success if the two principal parties in the relationship- the credit card issuers( banks) and the credit card holders( individual consumers) - acknowledge that theirs is a shared responsibility. The bank must strive to meet the credit card holder s needs. The credit card holder must use the card in a responsible manner. Overall, the bank says the credit card has broadened access to credit to all consumers. The bank has defined what responsibility should mean for the credit card holder: pay on time.

It insists that average interest rates have gone down from close to 20 percent to only 12 percent approximately, and in many cases issuers no longer charge annual fees. Keep within your credit limit. By following this simple equation, the credit card holder gets an interest- free loan for a certain period when they pay off whole balances every month, fraud and loss protection, plus instant and, and other benefits constant availability of credit. And maintain your creditworthiness. The bank also delineates what it sees as its responsibility: make sure customers understand the terms of their credit card account. Give them tools that help them pay promptly time and stay within their credit limits.

Show them how to manage their credit cards. Spot those in trouble and point to avenues for financial solutions. The bank has implemented a set of initiatives to promote greater customer understanding of the terms of their credit card account and to provide tools for managing accounts. And evaluate more carefully the credit applicant s capability to manage debt prior to credit card issuance. This program is channeled mainly through the company s special website, which it says details everything in clear and simple terms. Outlining procedures that allow customers in the military to keep their credit card accounts current when deployed overseas. Some of these initiatives involve: Putting detailed instructions and calculations that clarify the implications of paying only the minimum amounts instead of paying more on the balance, if not paying it off entirely.

Allowing all customers to choose their preferred due date for payments. Installing a system of communications where customers can sign up for timely alerts sent via phone, e- mail and text messages to remind them of payment due dates. Providing instructional materials for students and first- time credit card users to guide them in making prompt payments and keeping within credit limits. Providing for a system of automatic credit card payments. Individual credit card holders like you have made your opinions heard, to both the legislators and the credit card issuers. And, Creating an outreach program to reach those who may be having financial difficulties and to determine what assistance and financial programs can best help them. By heeding your opinions, and altering the criticized practices, holding a credit card is becoming even better than before.