| Bloomfield,
CT 06002 |
|
August
30 2005 |
| |
Consumers
who have been piling up debt with low interest rates could wake up
with a New Year's financial hangover, according to the Wall Street
Journal.
The Wall Street Journal said that the Fed recently raised its
target rate for the 10th consecutive time to 3.5 percent and
showed no signs of letting up.
The Wall Street Journal reports that households may start feeling
the pinch starting next year or in 2007 when many option
adjustable rate mortgages and interest-only loans begin to reset
at higher interest rates.
Here is what is happening:
Credit Cards: According to the Wall Street Journal, the
cardholders likely to be hit the hardest are those who miss their
payments as penalty rates hit record levels.
Some major issuers including J.P. Morgan Chase & Co. Citi-Group
Inc.'s Citibank and Bank of America Corp. now charge penalty rates
of more than 30 percent. The Wall Street Journal also reports that
rising rates also could hit cardholders later this year when many
issuers are expected to boost monthly minimum payments in response
to guidelines issued by federal bank regulators.
It is advised that consumers should aim to make a big dent in any
balances and shop around for more competitive offers.
Home equity borrowing: Consumers with outstanding home equity
lines of credit are perhaps more vulnerable in rising rates, the
Wall Street Journal reports.
Home equity lines of credit allow consumers to borrow against the
equity they have built up, and tap into their allotted amount
whenever they want. If they do, they must pay the money back over
a certain period of time and pay a variable rate of interest.
Home Equity: Borrowers with home equity loans, which have fixed
rates, have paid more in interest in recent years than those with
lines of credit, it was reported in the Journal. But, those fixed
rates haven't gone up as quickly as have variable rates for lines
of credit.
Bankruptcy Filings
To make matters more gloomy, bankruptcy filings to federal courts
in the April-to-June quarter totaled 467,333, according to data
released from the Administrative Office of the U.S. Courts. It
marked a record number of filings made in any quarter.
Of that total, most--458,597--were personal bankruptcy filings,
the remaining 8,736 were businesses filing for bankruptcy,
according to the report.
The new law goes into full effect on Oct. 17 of this year.
Supporters of the new bankruptcy laws state that new provisions
were needed to curb abuses of the bankruptcy system. While
opponents believe the changes will be hard on low-income working
people, single mothers, minority group members and the elderly,
and would remove a safety net for those who have lost their jobs
or face mounting medical bills, according to the AP.
Anyway you look at it, the honeymoon may be over for many
consumers. As a consumer advocate, I would recommend that
consumers take a hard look at all of their credit card debt and
bank loans. Next, pay as many off as possible.
Cynthia Bercowetz, consumer advocate and author of "Don't
Ripped Off! Get Help! Tell It to George." |
| |
Cynthia
Bercowetz (consumreye@aol.com)
Author/Consumer Advocate
22 Oak Lane
Bloomfield, CT 06002
Phone : 860-243-2208 |
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