Fed's Advice on Getting Best Credit Card Deals

Despite Falling Levels of Credit Card Debt, Consumer Advice Needed

Jun 27, 2009

A Federal Reserve report of June 5, 2009 highlights a fall in levels of consumer credit. The figures include revolving credit which is mainly credit card related.

The Federal Reserve figures, part of their latest Statistical Release, are accurate to April 2009 and show a 7.5% overall annual decrease with revolving credit decreasing at an annual rate of 11%. In hard cash terms revolving credit was down, from the previous month’s figure of $939.6 billion, to $931.00 billion.

In their analysis of the statistics, US brokers, Wachovia Economics Group argued that the steep drop was due to consumers cutting back sharply on purchases. They also speculated that with unemployment at record rates and the criteria for credit tightening, consumer spending would remain low.

Credit Card Spending

While there is an acknowledgment by some authoritative sources that consumers are reining in their credit card spending, others introduce a note of caution. “ Some Americans don’t seem to understand the errors of their past ways. The nation is still deeply indebted to credit card companies…” (Forbes.com May 20, 2009).

Credit Card Legislation

Recently introduced credit card legislation, The Credit Card Accountability, Responsibility and Disclosure (CARD) Act 2009, has allowed a fairer system of interest and penalty charges which will see a reduction in the monthly bill for many credit card users.

While this legislation is welcomed there is much more consumers can do to keep control of their credit card spending. By understanding the differences between the various types of credit cards and how these differences affect interest rates and charges, consumers can save themselves money.

Best Credit Card Deals

The Federal Reserve Board offers some excellent advice, which allows consumers to choose a new card wisely in order to get the best credit deals:

The first question for anyone applying for a new credit card is, quite simply, how is the card going to be used? Now that might seem to be a rather obvious question but consider this:

Once these questions have been answered it’s important to recognize that a credit card can have various Annual Percentages Rates (APRs). For example different rates for purchases, cash advances, balance transfers and penalty payments.

While this advice only scratches the surface the Fed offers much greater detail. For example:

Before applying for a card it’s a good idea for consumers to check out their credit report. Each of the credit reference companies that operate in the US, Experian, Equifax and TransUnion, have to provide people with a free copy of their credit report once every year, if asked for it. It’s an ideal opportunity to rectify any incorrect information before applying for new credit.

Credit Dispute

Advice about how to initiate a credit report dispute is available from TransUnion, Equifax and Experian credit reporting agencies.

Sources:

Yasmine Kamaruddin, Consumer Credit Plunged in April, Wachovia Economics Group website, June 5, 2009

White House Fact Sheet, Reforms to Protect American Credit Card Holders, May 22, 2009

The copyright of the article Fed's Advice on Getting Best Credit Card Deals in Consumer Education is owned by Neil Gunn. Permission to republish Fed's Advice on Getting Best Credit Card Deals in print or online must be granted by the author in writing.