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A Credit Card User Snapshot

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First Progress Platinum Select Mastercard® Secured Credit Card

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First Progress Platinum Select Mastercard® Secured Credit Card

First Progress Platinum Select Mastercard® Secured Credit Card

A new report was released recently and reveals a lot about the spending habits of American consumers. Initially, we thought that this past holiday season might be a record breaker for retailers; it started out with a bang, but by the time we welcomed the new year in, we know it was a far different story. It simply was not a good year for retailers as consumers tightened their holiday spending belts even more than last year. The National Retail Federation reports 28% of holiday shoppers for the 2012 season used credit cards as their primary form of payment when purchases Christmas and other holiday gifts, trips and of course, those holiday meals.

The report was quite extensive and looks at how well the 2009 CARD Act is doing its job. First though, we take a look at the consumers’ habits. You might be surprised to learn that 40 percent of low-and middle-income households use credit cards to pay medical expenses, their utility bills and even their mortgages (which is a double whammy considering both of those types of loans – credit cards and mortgages – have interest). We have, however, managed to rein in our spending since 2008, the fact that unemployment is still high, income growth is stagnant and fears over everything from what the new fiscal cliff guidelines mean as well as concerns about the new health care laws, are still wreaking havoc in the American financial industry. The U.S. Census Bureau estimates Americans will carry a total of $870 billion in credit card debt this year alone.

Despite the new laws, there are many who insist credit card company fees and lack of transparency will continue to add pressure to already-strapped family finances. Now that we know our paychecks are smaller, as evidenced in the rippling and undeniable cries of frustration over a broken promise of new taxes, it’s little wonder consumer behaviors and outlooks played a very significant role in this new study.

The evidence is clear: credit cards are a better, fairer financial product for American consumers as a result of the CARD Act. With improved disclosures and restrictions on the most abusive credit card practices, the law is working as intended…,

said Amy Traub, a Senior Policy Analyst with Demos. The new laws are working in tandem with different regulations the financial sector is held to. This, according to another new survey from JD Power & Associates, means as consumers, we’re much happier with our credit cards, the companies that issue them and the regulations we’re held to. With unfair late fees, unrealistic rate hikes and even the requirements of the card companies to inform us that our rates will be increased (they must now provide a 45 day advance warning), those who do have and use credit cards are doing so with less dread. The laws put into place those new standards for college students and even gift cards’ fees, too.

These changes are due in no small part to the CFPB, which has provided consumers countless tools for protecting their credit while also making it more difficult for predatory lenders to get to consumers who are desperate for solutions to their financial problems. The bureau put into place new rules when it was given enforcement powers and the ability to work with consumers regarding their legitimate complaints.

You might be surprised to learn that CFPB has brought several enforcement actions against major credit card companies – three in 2012 alone – for a range of abusive practices. The results have been nothing short of remarkable: $425 million in refunds to 5 million Americans.

CFPB has also collected a whopping 23,400 complaints against credit card companies since its founding and as a result, the complaint database put into place nearly three years ago is serving as a powerful incentive for companies to handle their complaints in a better way, long before they’re drastic enough for CFPB to step in. In recent meetings with Congress, CFPB director Richard Cordray said that the bureau has found “fewer credit card complaints” than it had expected due to the success of rules implemented after enactment of the Credit CARD Act of 2009. That just goes to show you how strong the American consumer’s voice truly is.

Here are more results from these surveys (based on low and middle income families that carry credit card debt):

  • 1/3 are paying down their credit card debt faster as a result of “clarity and disclosure” on the part of the card companies.
  • The number of households paying late fees dropped by half to 28 percent, and 24 percent fewer households reported interest rates increasing as a result of a late payment in the four years since the CARD Act was introduced.
  • Laws requiring a customer’s authorization to go over the limit on his or her credit cards has resulted in 22 percent fewer over-limit fees.
  • Only 2 percent of credit card accounts have seen rate hikes since CARD Act was put into place.
  • In 2010, total late fee payments fell from $901 million to $427 million.
  • Over the limit fees fell from 12 percent to less than one percent since the passage.
  • 80 percent of consumers say they have noticed that payments are now due on the same day each month.
  • 77 percent say they have read the new warnings from their card companies regarding late fees.
  • 70 percent have seen the new warning about the dangers of making only minimum payments.
  • The language in the small print has improved; as a result, $12.1 billion in yearly charges are now more transparent to consumers.

The question now, is what’s next? CFPB has moved mountains, despite those who believe it’s been burdensome. Millions of Americans are not only better informed, but have seen their personal finances improve as a result of that. But CFPB has more to do, it says. Most recently, a new rule has been proposed that will allow creditworthy at-home spouses access to credit cards. New arbitration rules are in the works and it’s also currently working on better student loan terms as well as reloadable prepaid cards and the sometimes exorbitant fees. Predatory payday loan regulations are also being considered.

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