It is true that Americans still have a hard time making ends meet and paying their obligations but the pressure seems to have eased up last July. According to Moody’s Investor Service, more people were able to pay their bills in July; this is a reversal of the earlier trend wherein defaults and delinquency rates continually increased.

Charge of Rate Down

US charge-off rate on credit cards dropped to 10.52 percent in July from 10.76 in June. The charge-off rate is annualized percentage of the total outstanding principal balance that is written off as uncollectable. While the improvement may not seem like much, it is actually the first month-on-month improvement since the September of last year.

Payment Rate Up

Moody’s Index reveal that payments have risen sharply in July across six major credit card companies including Citibank, American Express, and Discover. Payment rates have even reached 17.43 percent which is the highest point since October of last year. The payment rate is measured as the percentage of total outstanding principal balance that cardholders pay back each month.

Delinquency Rate

Overall, the delinquency rate for July is 5.73 percent, the lowest level in 2009. This figure is on track with the improvements seen in the months of April, May, and June. According to William Black, Moody senior vice president, “July tends of mark an inflection point with respect to seasonal trends”. That means that delinquency may be in the horizon because of back to school expenditures and holiday spending. The amounts included in the delinquency rate are monthly balances that are over 30-days delinquent.

Projection Still Bleak for 2010

The charge-off rate is expected to hit 12 to 13 percent by mid-2010. This coincides with the expected peak in unemployment rate of around 10 to 10.5 percent. However, it is important to note that these projections are simply that: projections. These presumptions can easily change if the charge-off rate and delinquency rate lowers in the next months. Comparisons of debt relief programs tell of the same tale.

With new reforms law being implemented in the finance industry left and right, it is almost inevitable for consumers to feel certain repercussions. The government, the banking industry, and the consumers are all adjusting to the new economic reality. There is a shake-up in almost everything from credit card practices, mortgage loan applications, and credit score. Our previous posts for this week dealt mostly about credit card practices. Now, we will look deeper into the expected changes on your credit report.

Justine @ Credit Karma talked about how your credit report can hurt your chances of landing a job. According to the Society of Human Resource Management, as much as 50 percent of companies look at the credit history of prospective hires. A lot of employers believe that an applicant’s credit report says much about his character, work attitude, and future job performance. For the 14.5 million individuals who had just lost their job, turning to their credit card can actually be damaging to their future employment. Be sure to have a repayment plan in place whenever you take on debt.

Sharon @ Mint listed the 10 Commandments when it comes to maintaining a good credit score. As you probably already know, the credit score can make or break your finances. In fact, it will even affect your chances of getting a job. Among the commands found on the post include not limiting loan types, not missing payments and not closing unused credit card accounts among others.

Tracy @ the Card Offers Blog offers advice to new credit card users with her post titled “What Does a New Credit Card User Need to Know?”. Basically, she cautions users against abusing their credit privileges. Less banks are issuing credit cards these days and they only do so when they have a reasonable expectation that the user can and will pay it back. If you make a lot of missteps on your first card, it might take years before additional credit is extended to you by any company.

It seems that Americans who worked hard to maintain good credit will be the first hit when the Credit Card Act of 2009 becomes effective tomorrow. Already, lenders are increasing interest rates across the board. The lowest available rate is now currently pegged at 11.25 percent which is significantly higher from 8.85 percent just this January. Meanwhile, customers with less-than-stellar rating have to pay 15.75 percent, up from 13.75 last January.

According to experts, banks are setting the rates this high so they can go down from there depending on market situations in the future. Fortunately, these rates increases would no longer come as a shock to consumers. Congress has given them a leeway of 45 days to reject rate increases. Americans have the choice of paying outstanding balances at current rates in a five-year timeframe. In addition, banks need to mail credit card bills 21 days before it is due.

Various parts of the credit card law are already implemented. For example, fourteen banks have dropped double-cycle billing, where finance charges are calculated on more than a single billing cycle. Meanwhile, eleven major banks have stopped the “universal default” practice wherein rates are rates because of missed payments even with another company.

What is the Catch?

The catch of the Credit Card Law is quite apparent: increased interest rates. Eleni Constantine, the director of Pew Charitable Trusts said that it has in fact increased by 20 percent from December. While increase might seem reasonable, the level at which it was increased certainly isn’t. The borrowing costs for banks are decreasing because of market condition. By raising the rates on consumers simultaneously, they are actually deriving more profits due to larger marginal lending rates.

Overall, the gains in the new Credit Card law are certainly welcome despite certain complications. However, it is important to keep in mind that it has been designed to help consumers with high balances. People with relatively good credit should be aware of these changes and decide whether they still want to use their credit cards or pay in cash instead.

Credit card debt is not only a problem  for individual consumers, but for small businesses as well. A study conducted by the Ewing Marion Kauffman Foundation revealed that having credit card debts reduce a new business’s capability to survive over the short term. Research indicates that during the first years of operation, these new businesses experience an increase in their debt before it stabilizes.

But why would new businesses use credit cards to finance business expenses? According to Robert Litan, the vice president for research and policy at the research firm, “Small businesses’ access to formal credit market historically has been limited, a situation that has been exacerbated with the recent contraction of credit markets”.

Over a half of new companies now rely on unsecured debt for their needs because of its ready access. It is also a lot easier to get than traditional business loans. Common sense tells us that the high interests charged by the bank makes it difficult for a start-up to repay significant debt loads in a short timeframe. That’s the reason why programs like business loans, auto loans, and other traditional loans exist in the market. They have lower interest rates suitable for the intended purpose.

Before you give up on your new venture or unmanageable credit card debts, here are some tips that can help you:

Improve Your Cash Flow – cash flow is a problem most new businesses face due to insufficient capital, slow-paying clients, and improper money management. Address by loophole that is holding up collection to get cash for repayment purposes.

Aim to Pay More than Just the Minimum – paying just the minimum required is ill-advised. Unless there is no other option, consider paying above the minimum each month to lessen your debt.

Avoid Credit Card Debts – this is the most practical advice this blog has probably given. To avoid the credit card trap, be sure to avoid additional debt if you know you can’t repay it on time.