This is another case of consumers paying for the mistakes made by the financial institutions that were bailed out with TARP Funds. Taxpayers bailed out the banks after their complex Mortgage Credit Default Swaps failed to cover defaulting mortgages.
Houston, TX (PRWEB) January 20, 2011
After seeing an increase in spending on bedroom furniture and appliances during the holidays, Americans are starting to see their credit card bills come in. The average middle class family may have to decide between buying metal beds or food while paying off their credit card bills. Average credit card interest rates have risen almost 45% since before the recession according to creditcard.com and this is going to increase the amount of time it takes to pay those bills off. This could slow down the recovery by increasing the time buyers need before they consider additional major purchases, such as furniture.
This is another case of consumers paying for the mistakes made by the financial institutions that were bailed out with TARP Funds. Taxpayers bailed out the banks after their complex Mortgage Credit Default Swaps failed to cover defaulting mortgages. This infusion of cash was meant to keep the banks from defaulting.
Banks have paid back the TARP funds leaving the impression that there was no cost to Americans, but Financial Institutions have passed on their losses to consumers again through increased banking charges and credit card interest. The Weekly Credit Card Rate Report by CreditCard.com shows that the National Average for credit card APR has increased to 14.71 at present from 10.25 at the beginning of 2008. One example cited by consumersunion.org is “ First Premier Bank MasterCard which has charged an interest rate of up to 59.9 percent on purchases and cash advances.” The effect of these increased credit card rates is to keep consumers paying off their balances longer, which ultimately may hamper their ability to purchase more goods.
When 60 minutes correspondent Steve Kroft asked President Obama about bonuses still being handed out at Financial Instructions, he responded by saying “I think in some cases that was a motivation, which I think tells me that the people on Wall Street still don't get it.” Well we don’t get it either. In February of 2010, Bank of America was expected to shell out $400,000 to each of their qualifying executives to total about $4.4 billion. Early investigations in 2011 seem to point to even bigger payouts by Bank of America with one executive receiving a proposed $7 million bonus in stocks according to a recent article by American Banking and Market News. Most of the card holders for this and other financial institutions would certainly prefer getting that money back in the form of lower credit card interest rates.
The furniture industry in particular stands to lose sales because of effect of these fees on customer’s monthly bills. Benjamin Weissman, President of the online furniture store, Home and Bedroom, says “We are all cutting costs and trimming our profit margins from the manufacturer down to make up for the high credit card company rates.
Consumers are taking advantage of better deals on their large ticket purchases only to have the difference eaten up by the bank in monthly and yearly charges. Manufacturers who offer exceptional quality and value such as Hillsdale Furniture, Fashion Bed Group and Pastel Furniture will probably continue to prosper, but those who are unable to adjust could be casualties in this complex market.”