Just when you thought things cannot get worse, it did. Millions of Americans who are already struggling with the economic downturn and credit card debt have received notice that their credit card companies are raising interest rates – just in time for the holiday season. Many have seen their rates doubling, some even tripling. Cash-strapped individuals are looking at more debts ahead.

The situation is worse for certain individuals. Those who are used to longtime fixed rate will see their interest rates soar to double-digits because of the shift to variable rates. Most of the activities such as giving consumers lower credit limit, interest rate hikes, and the increase in minimum monthly due are tied to the new federal policies set to start in late February. These measures will hinder banks from continuing their predatory practices.

As a result, the trend these days pose very little options to the ordinary consumers. According to customer surveys, consumers are now faced with unpleasant alternatives ranging from closing accounts to accepting tight credit terms. Rasmussen Reports conducted a survey which also revealed that around 50 percent of its respondents experienced rate hikes in the last six months.

At a time when banks are seen as the villain, these measures are greeted with censure. The legislative director of Consumer Federation of America said that “It seems like they’re hurting the customers they need the most.” Right now, the industry has already lost the trust of clients but they are still coming up with tricks to milk more money from struggling clients.

One method that was uncovered includes making notices of interest-rate hikes look like junk mail. Their purpose is to encourage consumers to throw these letters out without reading them. Everyone is affected by the current trend – whether you have a poor credit rating or the highest.

In an effort to jumpstart real estate prices, the Obama administration has extended a key tax credit for first-time home buyers and “move-up” home buyers. The HR 3548 also offers more help for unemployed individuals as well as people struggling with mortgage delinquency. The $8,000 tax break for first time homeowners will be valid until May 1, 2010. Meanwhile, “move-up” buyers need to sign the purchase agreement before May 1, 2010 and then close the deal before July 1 for the tax credit to be valid.

It should be noted that not everyone is eligible for the tax break. For example, individuals with adjusted gross incomes of above $125,000 a year and couples with over $225,000 a year cannot get this advantage. However, the new bill still provides a better deal compared to the previous one as the latter set the incomes at $75,000 and $150,000 respectively. This means that an additional segment of the market can get assistance. The following blogs provide more details about the extended tax credit:

Bob @ Broker for You uploaded an informative article titled “Move Up Home Buyers Tax Credit”. The content is particularly beneficial for individuals who are looking to buy a better home for themselves or their families. For example, it lets you know how long you should have stayed in your current home in order to be eligible for it as well as other details.

Alexis @ BV on Money wrote the blog post “6,500 Tax Credit for Home Buyers: Owners Have Good Reasons to Buy”. It talked about the main benefits of getting the tax break. Individuals who intend to buy a house in the near future should consider the credit because it is not everyday that a deal like this is available from the government.

Jeff @ Good Financial Cents has an interesting article. The “$8,000 First Home Buyer Tax Credit is Extended and $6,500 Credit Added” post provides basic insights about what you can expect from the recently passed bill. He also cited the effects this bill will have on individual households and the economy in general.

There is good news and bad news in the mortgage industry. The good news is that the rate at which homeowners lag behind on their mortgage has slowed down for the third consecutive quarter. The bad news is, the delinquency rate has hit another record high overall.

For the third month ending September 30, it is estimated that 6.25 percent of mortgage loans within the United States were 60 days or more past the due date. Based on the TransUnion finding, the figure is up 58 percent from 3.96 percent just last year. This figure is quite alarming because being overdue for 2 moths is usually the initial step towards foreclosure since the amount of money necessary to keep up is beyond the capability of most families to save.

The increase from the second to the third quarter wasn’t as high as the 11.3 percent rise during the first to the second quarter though. In addition, it is a lot lower than the 14 percent leap in the quarter before that. The slowing rate of delinquency is seen as a positive sign. However, the fact that there are still too many foreclosures out there shows that the industry is still problematic. According to F.J. Guarrera, the TransUnion VP for financial services, the firm doesn’t expect the figure to improve until the middle part of 2010.

It is also important to note that certain areas are hit harder compared to others. For example, Nevada has the highest rate of delinquency at 14.5 percent which is up from 7.7 percent last year. Another struggling area is Florida with a delinquency rate of 13.3 percent.

There are two factors that need to be resolved before mortgage delinquency rates goes down to a manageable level: unemployment and home values. Unless these two crucial aspects are improved upon, delinquency rates will take longer to resolve.

It is possible that the government might have overpaid a number of banks during its initial rescue attempt of American International Group (AIG). The company was in such big trouble that the Federal Reserve Bank of New York – previously headed by Treasury Secretary Tim Geithner – that the US government had to wind down its relationships with business partners.

The Federal Reserve Bank had paid the full face value of securities so that these businesses would cancel the insurance handed out by AIG. This was an attempt to relax the AIG’s liquidity trouble. However, reports leaked that at least one company had offered to cancel the contract at less than its face value. According to Neil Barofsky, the Special Inspector General, what it means is that the government might have paid billions more than what was necessary to cancel debt insurance contracts.

Why Was AIG Bailed Out at Any Cost?

Despite these findings, some analyst cannot blame the actions of the Fed during the crisis. AIG is too interconnected with other financial and non-financial firms that its failure could push the global banking system over the edge. As it neared collapse, officials decided to step up and bailout the company with billions of dollars and government guarantee to prevent a deepening of the crisis.

Whether the bailout is good for the long-term future of AIG and the government remains to be seen. This is because after several bailout attempts, the company now holds up to $180 billion in government commitments. The Treasury Department owns about 80 percent of AIG.

The Government Still Getting Some Criticisms

Critics though aren’t content with the government’s actions. They note that AIG’s trading partners knew full well what risks they are taking when they got insurance for credit-default-swaps. These partners showed willingness to take risks based on these actions. They should have been forced to take than 100 percent value of their contracts.

Neil Barofsky said that taxpayers are unlikely to recover the money infused into AIG.