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FED Report Finds Consumer Credit Card Responsibility Improving

FED Report Finds Consumer Credit Card Responsibility Improving

A recent report from the Federal Reserve Bank of New York assures that consumers have exhibited more responsible credit card use since the passing of the Credit Card Accountability, Responsibility, and Disclosure Act of 2009.

Since passing the Credit Card Accountability, Responsibility, and Disclosure Act (the Credit CARD Act), things have changed in the financial products industry. According to a report issued by the Federal Reserve Bank of New York, responsible credit card use has, indeed, improved since the enactment of the Credit CARD Act. This boost in responsible use has, accordingly, resulted in lower revolving balances, fewer account delinquencies, fewer bankruptcy filings, and better credit scores across the industry.

What is most interesting about these statistics regards how the credit card industry has always been in heavy opposition to the Credit CARD Act. Indeed, bigwigs in the industry were afraid that these new regulations would affect their overall streams of revenue because of the way the regulations enforce industry transparency regarding terms and fees. Fortunately for both consumers and industry leaders enacting these new regulations did exactly what they were supposed to do: empower consumers to acquire more accurate information and make better, more informed decisions regarding their own credit accounts. At the end of the day satisfied customers who know how to use credit responsibly turned out to be a much better asset to the entire industry.

Looking more closely at the findings, total credit card debt has fallen about 22 percent since 2008 (from $866 billion to $672 billion). Similarly, the number of open credit card accounts has also fallen and at a similar rate as well, about 23 percent (from 496 million to 383 million). What is most interesting, though, is that overall household debt fell less than one percent during the second quarter of 2012, which is definitely not as impressive numbers as the previous statistics. Experts, however, potentially attribute this very slight decline to a significant increase in student loan debt.

Michael Germanovsky, editor-in-chief at, commented on these findings:

Customers are getting smarter about managing their credit card debt, keeping balances low and making payments on time. This might be partly owing to the new, easier-to-understand language on credit card statements, which shows customers exactly how long it will take to pay off their balances if they pay only the minimum due.

This is definitely the bulk of the benefits that the Credit CARD Act of 2009 has introduced, but Germanovsky adds that it has been most rewarding for

rewards credit cards that offer cash back and travel rewards (because) if people have revolving balances that rack up interest, they cancel out their rewards. More customers are realizing that it’s better to pay off balances in full each month because of the Credit CARD Act disclosures.

Better, more responsible credit card use is not the only positive result of the Credit CARD Act of 2009. In addition to improved consumer responsibility, credit scores have also improved, but that should come as no surprise. Any credit card customer concerned with maintaining their good-standing-credit should simply make a concerted effort to make payments on time, keep balances low, and keep accounts open.

Payment history can account for as much as 35 percent of your credit score, followed by total available credit accounting for about 30 percent and length of credit history accounting for about 15 percent of the total credit score. By keeping accounts open, then, it will be easier to keep your balances around 10 percent of your available limit (which is ideal), which will also make it easier to continuing fulfilling your payment obligations every month.

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