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Credit Results of the Year

Credit Card Market: Year-End Summary

The end of December is an excellent time to sum up the results of the year. In general, 2008 was a depressive period for financial markets. Subprime crisis and the following recession have affected many banks and financial institutions. Trying to retain profitability in the difficult economic time, many lenders have increased their interest rates and fees. You can be disappointed to find out that the days of generous credit card offers may have gone.

Let's admit it: credit companies are not charities. It is a business like any other. Banks are not going to lend you money unless they think they can get a lot more back. They make their money from interest rates and fees that their card holders pay. When profits are down, they need to recoup their losses. Of course, they will raise their charges!

Many card holders have already noticed payment hikes. According to the consumer surveys, more than half of all customers said that their APRs have been increased. One third of respondents admitted that their credit card fees, for example cash withdrawals, have skyrocketed. About 15% of customers said that the lenders added new fees.

The next change is concerning introductory rates. Some time ago there were a lot of beneficial offers providing a 0% APR for 12-15 months. Nowadays many lenders base the length of the interest-free period on the applicant's FICO score. Even if you have a positive rating, you might get a zero APR for 3 or 6 months only. It is worth reading through the eligibility criteria before you apply so that you can make sure you have all the necessary information.

As the economy is going on faltering, many people find themselves trapped in corner: they can't pay off their debts due to raising food and gasoline prices and they can't get approved for lower interest rates that could help because of bank' tightening credit standards. As a result, total bankruptcy filings nearly doubled in comparison with the same period two years ago.

As for balance transfer offers, lenders are not likely to welcome you with cheap deals, especially if your credit is not in the top tier. If you want to move your debt to a new plastic, you may need to pay for it. Although the standard fee remains 3%, many lenders have removed caps on the total charges.

In addition, credit offers with low interest rates for the life of the balance have practically disappeared. Nowadays many banks provide introductory period for up to 12 months. For instance, Blue and Blue Cash® cards from American Express comes with a 2.99% fixed APR on balance transfers for 12 months instead of a fixed 4.99% APR on balance transfers for the life of your balance.

What to expect from the next year? While 2008 was a difficult period when lots of things imploded, they are far from being repaired. Some analysts say that the recession won't be over before the end of 2009. The problem is that the main driver of economic activity - the consumer - needs to improve his financial situation.


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