Credit Card Debt Forecast Signals Ominous Warnings to Consumers

China signals will cut off credit to rebalance economy

There are a couple scenarios. We could continue to spend beyond our means until debt levels become unsustainable, charge-off rates bounce back from record lows, credit availability tightens and the economic recovery is put in jeopardy. Or, we can come to the realization pre-recession spending was buoyed by income levels affected by the housing bubble and readjust our perception of necessities, budgeting and paying off debt. Which would you prefer? Its pretty much a no-brainer, but that doesnt mean the process will be easy. Reining in spending requires making tough choices and breaking bad habits. However, the current credit card landscape lends itself to consumer improvement. More specifically, credit card offers with a zero introductory annual percentage rate are abundant and becoming increasingly attractive. According to data by CardHub.com, the average credit card offering zero percent interest on new purchases has an introductory rate of around 10 months 2.53 percent longer than offers that were on the market at the end of 2012. The same is true of the average zero percent balance transfer term on credit card offers. When considering the average indebted household owes a balance of $6,591, according to CardHubs 2013 credit card study, a middle-of-the-road balance transfer card could be worth as much as $1,000 in avoided fees and finance charges. High-end outliers can be worth even more. For example, the Slate Card from Chase offers zero percent interest rate for the first 15 months and charges neither an annual fee, nor a balance transfer fee. Suppose you have an average credit card balance and a card with a 17 percent interest rate. If you can afford to pay $275 per month to your credit card company, the Slate Card could help you climb out of debt in a quick fashion. However, transferring a balance to a credit card alone wont solve one’s debt problems. Consider these tips for getting your personal finance house in order and keeping it in shape moving forward: 1. Maximize your credit standing. Good credit cards on the market like the Slate Card from Chase require an applicant has an above-average credit score to qualify. Since some of these cards provide zero percent interest on new purchases for up to 18 months and hundreds of dollars in initial rewards bonuses, it pays to have good credit. You can estimate where you currently stand, but the credit-building process will be the same regardless of your starting point.
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Is a hotel credit card right for you?

In other words, they just don’t care. If you’re among those consumers, I can explain to you how strong credit scores can save you money, and point out that your credit reports may contain mistakes that are raising your interest rates and causing you to lose out on the best discounts on your auto or homeowner’s insurance. I’ll tell you that monitoring your credit scores can alert you to changes to your credit reports which, in turn, may help you catch identity theft faster if you become a victim. Maybe you’re not worried about any of that right now. That’s fine. But someday that may change. And if you wait until then, it may be too late. Why Your Credit Score Matters Let’s say you find a house for sale and fall in love. In today’s hot real estate market in much of the country today, you may need to get preapproved for a mortgage ASAP so that your offer will be considered seriously. What happens if you find a mistake that takes 30-60 days to clear up? Or how about if you are a victim of a natural disaster and need access to credit to make repairs while you wait for your insurance company to write a check? Are you really going to want to deal with your credit report then? You could lose your job and find that you need access to low-cost credit to start that small business you have always dreamed of owning. Starting a business is time-consuming enough without adding another item to your to-do list. Perhaps you’ll have to relocate to be closer to family or a new job, and you’ll have to get a mortgage to finance your new home while you try to sell your current one. Who knows? The point is, life happens. And when something does come up that throws a wrench in your plans, will you really want to find yourself worrying about checking — and perhaps working on — your credit reports and scores? Do yourself a favor and get your free credit reports and free credit score now, when you aren’t pressed for time or under the gun to get approved for a loan. By the way, in the same survey, 7% of consumers over the age of 25 who had never checked their credit scores said they didn’t want to pay the associated fees.
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Credit: Reuters/Carlos Barria By Koh Gui Qing and Langi Chiang BEIJING | Fri Jul 5, 2013 7:21am EDT BEIJING (Reuters) – China said on Friday it would cut off credit to force consolidation in industries plagued by overcapacity as it seeks to end the economy’s dependence on extravagant investment funded by cheap debt. In a statement from the State Council, or cabinet, Beijing laid out broad plans to ensure banks support the kind of economic rebalancing China’s new leadership wants as it looks to focus more on high-end manufacturing. President Xi Jinping and Premier Li Keqiang have flagged for some time that the rapid growth of the past three decades needs to shift down a gear, and analysts said Friday’s announcement was a signal that they intended to press on with reforms despite evidence of a sharper-than-expected slowdown. “The guideline shows China’s policymakers will focus more on economic restructuring to stabilize the economy rather than providing more liquidity to support economic growth,” said Li Huiyong, an economist at Shenyin Wanguo Securities in Shanghai. The slowdown in the world’s second-largest economy has started to put pressure on credit card debt relief some businesses. On Friday, China Rongsheng Heavy Industries Group (1101.HK), China’s largest private shipbuilder, appealed for financial help from the government and big shareholders, after cutting its workforce and delaying payments to suppliers. Analysts said the company could be the biggest casualty of a local shipbuilding industry suffering from overcapacity and shrinking orders amid a global shipping downturn. New ship orders for Chinese builders fell by about half last year. The State Council said it would ensure credit kept flowing to businesses that it thought had competitive products, but it would work with banks to oversee a gradual winding down of other businesses. “The government will adopt differentiated policies based on the varied situations in the industries plagued by overcapacity,” it said. It did not mention any specific industries or companies and there was no suggestion it was referring to Rongsheng. CASH CRUNCH Friday’s announcement was the latest sign that China’s policymakers are determined to bring debt-fuelled expansion under control, after the central bank allowed a cash crunch last month that sent short-term lending rates to record highs. Ma Tao, an analyst with CEBM Group, an institutional investment research firm in Shanghai, said sectors such as construction materials, steel and aluminum suffered from overcapacity, as well as high debt and financing costs. “The recent credit crunch also served as a catalyst for their cash flow problems to emerge as liquidity has not been eased,” said Ma. The State Council also said that, in future, so-called wealth management products issued by banks would have to be linked to specific projects, rather than being mixed together with banks’ other pools of credit. Such a move would prevent some of the riskier lending practices in the shadow banking market that the central bank has been trying to address. Explosive credit growth, particularly in the opaque shadow banking system, is seen by analysts as one of the biggest risks to China’s economy, along with a frothy property market and the run-up of debt by local governments. Underlining the last of those risks, a senior official said on Friday that the government did not know precisely the extent of local governments’ debt, and warned that it could be more than previous estimates. Estimates of local government debt range from Standard Chartered’s 15 percent of the country’s GDP at end-2012 to Credit Suisse’s 36 percent. Fitch put the figure at 25 percent when it downgraded China’s sovereign debt rating in April. Vice Finance Minister Zhu Guangyao said China had not released official figures since a 2010 auditing report that put local government debt at 10.7 trillion yuan. “Currently, nationwide surveys, I think this number will rise,” Zhu said, defending the debt as mostly geared toward fuelling infrastructure projects. (Additional reporting by Shao Xiaoyi and Michael Martina in Beijing, Clement Tan and Umesh Desai in Hong Kong and Ruby Lian in Shanghai; Writing by Alex Richardson; Editing by Simon Cameron-Moore)
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‘I Don’t Care About My Credit Score’

Every mundane purchase you make could be bringing you closer to a free resort stay in Hawaii. Post to Facebook Is a hotel credit card right for you? on USAToday.com: http://usat.ly/1602zSo Incorrect please try again A link has been posted to your Facebook feed. Tweeted! A tweet has been posted to your Twitter account. Sent! A link has been sent to your friend’s email address. Is a hotel credit card right for you? George Hobica, Special for USA TODAY 7:48 a.m. EDT July 2, 2013 Every dollar you spend on mundane purchases using a branded loyalty credit card could be bringing you that much closer to a free hotel stay in an exotic locale. (Photo: Digital Vision. Getty Images) Picking up a gallon of milk at the store? Taking in the car for that long overdue oil change? Every dollar you spend on mundane purchases such as these no matter where, no matter when could be bringing you that much closer to a free resort stay in Hawaii. (Or maybe you see yourself somewhere else on your next vacation. That’s cool. We don’t judge.) Hotel chains around the globe are also in the credit card business, and, considering how many travel reward credit cards are out there, you can bet it’s a competitive scene. WHICH PAY BEST?: Travel rewards credit cards Whether you’re a frequent traveler or merely strive to be one, every dollar you put on a credit card can and should be earning you travel rewards. It’s that simple. Stay disciplined and use the card for every possible purchase, whether it’s coffee at your favorite cafe or a tank of four-dollar gas, and you’d be surprised at how quickly the rewards can rack up. To tempt you in, these cards tend to have great signing bonuses some greater than others, of course that get you on your way to free hotel stays almost instantly. Sounds great, you say, but what’s the catch? Unlike general rewards cards, with the branded cards, loyalty is a must to get the most out of your spending. Second, make sure there isn’t an overly steep annual fee for the card if you’re not going to offset it with rewards, then maybe a more general reward card (or at least one without an annual fee) is best for you. And, of course, read the fine print.
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