http://www.reuters.com/article/idUSTRE5BN2I620091224
Summary:
The articles discusses the effects on credit cards with the new rules implemented in 2010. Lenders will not be able to raise interest rates on existing credit card balances unless the account is at least 60 days past due, and will not be able to charge fees for customers spending more than their limit, unless cardholders agree to the fees. Some companies already estimate their net income would be reduced by $500 million to $750 Million dollars. Credit card lenders enjoyed profits earlier but the party ended as the financial crisis sent default rates to record highs. Also with a steady decline in unemployment doesn't help this situation.
Connection:
The connection with the article and chapter 7 is the creation of money. The credit card is not money, but represents instant access to money through a loan. When someone deposits money into the bank and you swipe your credit card, the money spent is created. You can spend however much but that money is still in the other person's bank. So therefore money is created.
Reflection:
I think that with the new rule on the credit cards, it is great for the cardholder because there needs to be an agreement between the credit card company and the cardholder before additional fees take place. Also with the Vancouver 2010 Olympics just finished, the taxes in order to pay off the debt will be fairly large. With this new rule, people could spend that money that would be spent on credit card fees to pay for the taxes due to the Olympics.
Summary:
The articles discusses the effects on credit cards with the new rules implemented in 2010. Lenders will not be able to raise interest rates on existing credit card balances unless the account is at least 60 days past due, and will not be able to charge fees for customers spending more than their limit, unless cardholders agree to the fees. Some companies already estimate their net income would be reduced by $500 million to $750 Million dollars. Credit card lenders enjoyed profits earlier but the party ended as the financial crisis sent default rates to record highs. Also with a steady decline in unemployment doesn't help this situation.
Connection:
The connection with the article and chapter 7 is the creation of money. The credit card is not money, but represents instant access to money through a loan. When someone deposits money into the bank and you swipe your credit card, the money spent is created. You can spend however much but that money is still in the other person's bank. So therefore money is created.
Reflection:
I think that with the new rule on the credit cards, it is great for the cardholder because there needs to be an agreement between the credit card company and the cardholder before additional fees take place. Also with the Vancouver 2010 Olympics just finished, the taxes in order to pay off the debt will be fairly large. With this new rule, people could spend that money that would be spent on credit card fees to pay for the taxes due to the Olympics.
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