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Taking a Look at Credit Card Debt in 2009

In 2009, the state of credit card debt and the action of American credit card companies have been a direct reflection of the nation’s rocky economic condition. According to an official statement released by the White House in May of 2009 “Nearly 80 percent of American families have a credit card, and 44 percent of families carry a balance on their credit cards”. Usage is up as helpless consumers have been forced to turn to credit cards for necessities not luxuries however, Americans are still attempting to pinch pennies and reduce credit card usage in an attempt to protect themselves wherever possible.

The Changing Times

However, consumers aren’t the only ones bracing themselves for what’s to come. Tough times are affecting both the consumer and the credit card companies and some companies are scrambling to adjust their practices to accommodate the dismal economic climate as well as protect themselves for the future.

Formerly, harsh economic times have typically signified flourishing times for credit card companies and debt collectors, however during the current recession some credit card companies have realized that most Americans are unable to pay their bills as the economic situation worsens. Surprisingly enough, this realization has led some companies to grant their customers forgiveness. According to an article in the New York Times, “some lenders and their collectors are rushing to round up what money they can before things get worse, even if that means forgiving part of some borrowers’ debts. Increasingly, they are stretching out payments and accepting dimes, if not pennies, on the dollar as payment in full.” Companies such as Bank of America, Chase and American Express have claimed participation in waiving late fees, lowering interest charges and, reducing loan balances and offering forgiveness to faulty customers on a case by case basis. However not everyone has been lucky enough to benefit from these clemencies and all credit card users should remain wary.

The Credit Card Act of 2009 – How if Effects you

Thanks to the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 which has been put in place to protect consumers from sneaky practices and help them regain control of their finances – regulations will begin putting limits on fluctuating interest rates, ban controversial practices and arm consumers with more information about their debts. "With this new law, consumers will have the strong and reliable protections they deserve. We will continue to press for reform that is built on transparency, accountability, and mutual responsibility – values fundamental to the new foundation we seek to build for our economy," President Obama said in an official statement in May.

However, this act will not take full effect until February of 2010, which is a blessing for many and a curse for some. Credit card companies are doing everything they can to compensate for what is to come and customers will have to endure the worst before things get better. First, they are tightening standards for credit card applicants, turning away many creditworthy customers and offering smaller credit lines. Interest rates and fees are also being raised and companies are switching customers with fixed rates to variable ones.

Help Yourself

Despite the recent courtesies and policy changes, credit cards are still risky business. Americans should take this as a lesson that credit is not money and spend within their means. “Only when this country can rely less on imaginary money will we be able to finally restore this nation’s economic strength.” Says Sebastian Vivant, international finance student at NYU, “Set realistic budgets for yourself and stick to them.” Use your credit cards wisely by paying off your balance each month and limiting the number of cards you own. By practicing responsible credit card use not only will you free yourself of a tremendous burden but you can be rewarded with major benefits such as cash back, good or better credit scores, program incentives and financial piece of mind.