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Less Banks Issuing Credit Cards

Before, consumers with relatively good credit standing can expect to receive credit cards on their mail box. It has even become a nuisance for some. However, after years of doing this practice, financing companies are suddenly getting picky. Not only are they not giving out credit cards through mail anymore, they have also tightened their requirements by asking applicants for proof of their income (pay stubs, etc). And these consumers need to deal with high interest rates, more fees, and lower credit limit.

This reaction is really not surprising because banks typically tighten credit during an economic crisis. But what makes today’s development unique is that credit card companies also need to comply with the Credit Card Act of 2009. The new policy bans certain banking practices, limits fluctuating rates, and gives consumers earlier and more detailed information about their debt.

Though credit card companies have until February 2010 to implement all provisions stated in the law, a lot of them are now tightening things up before too many of the restrictions become legally effective. In addition certain provisions have earlier deadlines. For example, issuers now need to mail bills at least 21 days before the due date this August. In addition, they also need to allow at least 45 days notice before they implement any significant change regarding their terms of service.

Specific steps undertaken by credit card companies include:

-Credit standards are tightened – more applications are getting rejected. Those that get approved have smaller credit lines.

-Interest rates and fees are raised. From fixed rate, credit card companies are moving to variable rates.

-Rewards programs are enhanced for credit-worthy consumers but companies are asking for higher fees as well.

The industry is scrambling to find the new profitable segment. This is because without the flexibility to charge customers based on the risk they pose, the old calculations will no longer apply.

Tax Hikes – What It Takes to Plug the US’s Gaping Budget Deficit?

National Economic Council Director Larry Summers and Treasury Secretary Tim Geithner provided rare good news about the US economy. It seems that the worst economic crisis that hit the country since World War II is finally coming to an end. However, this raises a new, and probably equally daunting question, “how will the Obama administration pay for its free spending ways?” It seems that President Obama will have no choice but to increase taxes or possibly, a second stimulus package?

Obama’s Broken Promises?

The administration’s economic officials have failed to assure the public that there won’t be any tax hikes despite the President’s previous (campaign) promise that Americans who earn less than $150,000 a year won’t see their taxes go up “by a single dime” while Obama is president. In fact, they did just the opposite; the hinted that middle-class Americans may need to pay more in order to pay the gaping budget deficit.

In separate television interviews, both Tim Geither and Larry Summers both did not clearly state the President’s intension. However, they refused to rule out tax hikes as well. Summers, as he was discussing the healthcare proposal, said that the funding needs to be sourced somewhere.

Meanwhile, Geither said that the White House will “do what it takes” to tackle the deficit problem. He further stated that “If we want an economy that’s going to grow in the future, people have to understand we have to bring those deficits down” while adding that the solution might come in the form of healthcare reforms.

Republican Reactions

The planned tax hike is, of course, greeted by angry protests from Republican critics. They say that this is another socialist reform by the Obama administration. John McCain, Obama’s rival for the presidency, stated that “it’s pretty clear that if you pump trillions of dollars into the economy, you will see some recovery”. But he cautions that the long term consequences of this action can be devastating.

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