Credit Card Debt Declines as Some Rates Rise

The Federal Reserve announced further declines in consumer credit card debt yesterday -- another sign that people are clamping down on their budgets and paying off debt. It also reflects the fact that credit card companies have tightened their lending standards, making it more difficult for consumers to take on additional debt. Credit card debt decreased at an annual rate of 3.75 percent in May. Meanwhile, the personal savings rate, which measures how much of their disposable income Americans save, rose to 6.9 percent, up from 5.6 percent in April.

This shift towards frugality is likely to continue, and upcoming credit card legislation could make it even easier. Parts of the recently passed credit card legislation soon will give people more time to shop around for a new credit card when their rate goes up and avoid paying late fees on existing balances. By August 20, credit card companies will have to let consumers know about rate changes 45 days in advance and send bills at least three weeks before they're due. Bill Hardekopf of www.LowCards.com says that will help cardholders find a new card if they're not happy. (For the rest of the changes, including a ban on rate hikes on previous purchases, we have to wait until February 2010.)

But not everyone is benefiting from the legislation, at least not yet. Some credit card companies are pushing through rate increases and fee hikes while they still can. LowCards.com collected some of these changes:

• J.P. Morgan Chase increased the required minimum payment to 5 percent from 2 percent for some customers.

• Bank of America increased its balance transfer fee to 4 percent from 3 percent.

• Chase increased its balance transfer and cash advance fee to 5 percent. The change goes into effect in August.

• Bank of America and Chase announced they'll be moving some of their customers to variable rate cards from fixed rate cards, which means that the interest rate can continue to fluctuate, even after the rest of the legislation goes into effect.

Are you changing your own credit card habits, or have you noticed any changes to your card policies?