The Truth About Plastic Money

The prevailing credit crunch has led to high rate of unemployment, financial hardships, and the consumers are being bombarded with high interest rates, reduced credit limits. There were some cardholders whose accounts were closed. The credit card companies were blamed for not informing these changes to its customers. It is a well known fact that the subprime mortgage crisis has led to a liquidity crunch. Lenders have become exceedingly cautious. Subprime lending can be partially held responsible for giving rise to the credit crunch.

The changes introduced in payment policy of plastic money were mainly to protect lenders from incurring any further financial loss. The number of credit cardholders defaulting in their payments has also increased manifold. However, as per data collected from one of the major credit card company, the number of unpaid bills for plastic money may stabilize over the next couple of months.

One of the credit card giants American Express announced that the rate of credit card debt that remains uncollected increased by approximately 02,% taking the figure to 8.8%(as of March 2009). The rate at which the defaults have increased is a solace by itself because the rate of default has comparatively slowed down. It also indicates that consumers might be facing less problems with credit card payments and hence the slow down.

The same card giant also declared that number of delinquent loans also subsided by 5.1%. This indicates that consumers are defaulting less. Financial analysts are very optimistic about the positive signs. Darin Newsom, a senior analyst said “We haven’t solved all of the problems yet, but the market likes these little indications that may be some of the worst has passed”.

To remove anomalies occurring in the credit card industry, the government introduced new regulations that will take effect not before July 1st 2010. The new regulations were introduced as the consumers had been complaining for the last couple of years to change norms pertaining to credit cards. The government expects that with the introduction of the new credit card rules, the “preying mentality” of the credit card issuers can be curbed to a great extent.