New York (PRWEB) April 29, 2014
Strategic Consulting Services (http://www.strategiccs.org), a New York firm providing client-focused financial consulting for consumers, sees new practices in the business of credit card lending as being less favorable to consumers. The result of a marketplace that isn’t friendly to borrowers is that consumers are paying off their credit cards faster and are becoming more reluctant to use credit cards. Recent court cases, credit card usage trends, data theft with credit cards, and industry reports all point to a shift in how credit cards are used within America.
Recently, a U.S. District Court dismissed a lawsuit accusing three big credit card issuers of colluding to remove the opportunity for consumers to file a class action lawsuit, a consumer response which has previously kept the industry in check. The lawsuit claimed a conspiracy ran from 1999 to 2003, when 10 banks and their lawyers held more than 25 meetings to discuss how to impose mandatory arbitration clauses in cardholder agreements. This ruling means customers have no collective power left to fight card companies and instead must incur higher costs to pursue individual claims.
As banks are getting the upper-hand legally, analyst reviews of the U.S. credit card industry by Moody’s also indicates that credit card issuers have stronger profitability and asset quality, with continued advances expected throughout the remainder of 2014. Consumers can be impacted by this news in that the nation’s purchase rates with credit cards had been increasing annually around nine percent, even since the financial crisis of 2008. During the recession that followed, however, Americans have shown more caution about borrowing and spending, which still has echoes today.
In February, outstanding revolving credit, including card debt, fell $2.4 billion or 3.4% from the year before. In comparison, total outstanding consumer debt (for all types of debt except mortgages) has increased 5.6 percent over the last year. So while student loans and car loans are on the rise, credit cards are getting paid off. According to Federal Reserve statistics released this month, the average U.S. household has outstanding balances of $15,191 in credit card debt. All totaled, American consumers owe more than $854 billion in credit card debt, $8 trillion in mortgages and more than $1 trillion in student loans.
Wide-spread data theft involving credit cards is also impacting the relationship of consumers and their cards. With unknown millions of consumer’s personal data at risk from data breaches at large retailers, consumers must be more vigilant of their credit report to spot fraudulent activity. When someone’s personal data is stolen and used to purchase a house or file a tax return, often it is only caught when the individual checks their credit report. Nearly one in five have an error on one of their credit reports, meaning millions of consumers have errors that would make them pay more for interest on a loan. Concerned by this statistic and the importance of individuals monitoring their scores, the Consumer Financial Bureau (CFPB) is calling on credit card companies to give more visibility to credit score free of charge for consumers. Although U.S. law provides an annual free credit report from each of the reporting agencies, the CFPB has found that only one in five individuals check their scores annually.
“In the years before the financial crisis of 2008 there was a surge of credit-card borrowing before dropping sharply during at the start of the recession. After the economy hit bottom, consumers began to borrow again, but with a different mindset. The mortgage still gets paid first, but paying off credit card debt became more important since the recession. Yet during this same time credit card companies became smarter and found ways to maintain their profits,” says Ben Kittle, Senior Financial Consultant at Strategic Consulting Services. ”Now that credit cards are more of a liability in protecting your purchase transactions and personal information, consumers are more aware of what they’re buying and how. Credit cards don’t have the carefree image of success they had in the 1980s. Today they’re a threat to financial happiness and personal security.”
About Strategic Consulting Services
Strategic Consulting Services is a financial services firm with teams specialized in Debt Management, Mortgages and Business Services. With a comprehensive client-focused approach, the Company provides assessments looking beyond immediate financial issues to help clients build greater financial strength with smart habits and choices. Since 2007, Strategic Consulting Services has helped individuals and small businesses create savings plans, reduce debt, and make wiser spending choices. For more information visit http://www.strategiccs.org.