Q: I have several cards that I don’t use, and I worry that I could get hit with inactivity fees and other new fees if card companies look for ways to make money in reaction to the new credit card law. It seems as though it would be better to close the credit-card accounts rather than have to pay the fees, but I’ve heard that doing so can hurt your credit score. Sounds like a Catch-22. What should I do?
Federal Reserve Chairman Ben Bernanke on Thursday offered one of his most aggressive defenses of the central bank’s role in the future of bank supervision in response to a question from Sen. Richard Shelby (R., Ala.) during an appearance on the Senate Banking Committee.
Here’s his response to a question about why the Fed should be the top cop for large financial companies:
“I think that stripping the Federal Reserve of supervisory authorities in the light of the recent crisis would be a grave mistake for several reasons.
Fannie Mae and Freddie Mac, the mortgage-finance companies under government control, are reporting fourth-quarter losses after writing down the value of tax credits and setting aside money for housing-market losses.
Freddie Mac posted a $6.5 billion net loss as it marked down $3.4 billion in low-income housing tax credits that the U.S. Treasury Department barred the McLean, Virginia-based company from selling, according to a filing today. Fannie Mae, which plans to report official results this week, said it’s taking a $5 billion charge for the same reason.
For the first time in three years, credit-card issuers are ramping up their mailbox solicitations, but don’t expect to see your father’s credit-card appeals. Variable interest rates, higher annual fees and a host of new charges will be hidden in the fine print of these offers.
With new consumer protections in the Credit Card Accountability, Responsibility and Disclosure Act set to take effect Monday, the nation’s largest credit-card issuers upped their direct-mail solicitations to consumers by more than 45% in the fourth quarter from the prior quarter, according to two leading market-research firms.
After a two-week advance, stocks are just shy of crossing into positive territory for 2010, but the week ahead brings hurdles that could challenge the momentum.
“The economy is in recovery mode, but it doesn’t feel like it for most people,” said John Canally, economist at LPL. “Add to that the issues being debated in Washington, ongoing questions about China and Greece and when the Fed might start to raise rates, and you’re bound to see a volatile market.”
Federal Reserve to Wall Street: The days of easy money — and, just maybe, easy profits — are numbered, Graham Bowley and Eric Dash report in The New York Times.
News on Thursday that the Fed would raise the interest rate that it charges banks for temporary loans was seen by lenders as a sign that their long, profitable period of ultralow rates was coming to an end.
The move suggested that policy makers believed the nation’s banks had healed enough to withdraw some of the extraordinary support that Washington put in place during the financial crisis. And, while all those bailouts stabilized the banking industry, it was low rates from the Fed that helped propel banks’ rapid recovery.
Most credit card companies today offer low or 0% interest rates for the first 6 months and sometimes longer. While this can be a great way to save it can also be dangerous. The motive of the company is to start you out with no interest so that you will build a high balance on the card without the ability to pay it off, and then when the introductory rate is up interest will begin building on that balance and they will begin making money.
Credit card charge-offs – or loans deemed uncollectible and written off – edged mostly upward in January as reported by the major card issuers, although there is some optimism in the stabilizing of delinquency rates.
Delinquencies – accounts running 30 days late – is generally a harbinger of bad loans to come. Most of the major card issuers either reported modest decreases or little change in the delinquency rates for January compared with December.
But for now, the credit card issuers are mired in write-offs as they face the prospects of reduced revenues from landmark restrictions on interest rate hikes and some fees taking effect on Monday.
Canada is implementing three changes to mortgage rules that will help protect the housing market, Finance Minister Jim Flaherty said on Tuesday.
Depending on the source, Americans carry an average of $5,000-$9,000 on their credit cards.
Linda Pichler with Consumer Credit Counseling Services says, “That’s where most people get into trouble,” adding that the new law will keep credit card companies from burying consumers in penalties, fees and surprise rate hikes. “The new law is definitely going to help the consumer and will regulate rate increases.”
Kevin Jackson with HCCP says the companies will be forced to give 45 days notice if they are going to raise your rates, and he agrees the law will benefit millions of card holders. The new rules also mean simpler, clearer statements.