Rule Revisal Adverse Effects
The problem has been long coming with a large percentage of Americans paying their credit card bills late or never paying them at all. The small businesses which rely on credit to pay their bills are suffering the brunt of this lax.
The Federal Reserve has planned to revise the credit card rules and are clamping down on credit lines. The Feds said the cause was “tight credit conditions” which clearly implies that we are still very much assailed by the liquidity crunch.
There are indications that some investors have soured on a kind of bond backed by credit card debt. Considering the past of the U.S Financial System the Feds have taken steps to make the credit card securitizations safer as per the Wall Street Journal. Such conditions in the credit card market are forcing banks to tighten their lending standards. Banks currently have fewer resources to make loans on credit cards or carry out large balance transfers.
The ripple effect of this cut down is affecting small businesses and taking away the advantages they have for expansion, categorization and tracking by using business credit cards. Todd McCracken, president of the National Small Business Association said on MarketPlace Radio that apart from high interest rates, using credit cards to fund their businesses carries other risks.
The sudden rise in interest rates can create chaos for small businesses trying to make payroll. The current policies are going to do them a world of harm.
