Daily Dupaco

Wednesday, February 09, 2011

Consumer sees 50% rise in her credit card's rate

Increased usage of credit cards is a sign that consumers are gaining confidence in the economy, say analysts.

The Federal Reserve said this first increase in credit-card debt since the financial crisis has helped to boost overall consumer borrowing by 3 percent in December (npr.org). When the economy tanked there was a flight to saving, with households reining in borrowing and spending.

The shift in economic conditions has some lenders loosening their restrictions on credit, making credit more attainable for consumers. But people with new or existing credit cards must continue to pay attention to the disclosures - the fine print that outlines fees, interest rate rules, etc.

Those with less than perfect credit history should pay particular attention to that fine print. CNN Money recently reported on Texas resident Toni Riss, who was approved for a low-limit credit card with a 29.9% annual percentage rate. After 6 months the disclosure mailed to her indicated that her rate would rise to 79.9%.

"Consumers carrying a balance on these types of high-rate cards will rarely see any downward movement of their balance," said Matt Dodds, Dupaco Credit Union's Senior Vice President of Consumer Lending. "Using debt consolidation to pay off credit card balances in full may be one option to escape that trap."

Dodds recommends consumers contact their local credit union as a starting place for individuals seeking to eliminate their high-cost debt.

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