Due to the economic problems that are affecting countries around the globe, many banks are reluctant to lend money to each other – let alone to consumers. As a result of this credit crunch, businesses and individuals cannot get their hands on the money they need to stay afloat. Obviously, this results in a catch 22 situation that only worsens the strength of the economy. After all, if banks are not in a situation to extend loans to consumers, consumers will not be able to purchase big-ticket items and the economy will falter. Similarly, without the help of loans, businesses cannot expand or hire additional workers.
In an effort to ease this problem, the Federal Reserve has auctioned $75 billion in loans to banks that are experiencing financial hardships. The goal is to help them overcome their credit problems so they can once again be an integral part of the economic cycle.
This program actually started back in December and this most recent auction is the 13th one to take place during that short time period. With this auction, banks were asked to pay a small 2.26% interest rate on short term loans that are good for only 28 days. In all, 73 institutions placed a bid and the Federal Reserve received bids for $95.9 billions worth of loans - $20.9 billion more than what was up for auction.
Obviously, banks are responding favorably to the program, which is meant to help them get over their credit problems. Of course, the fact that the need outweighed the available funds is not a very good sign.
The Federal Reserve has made some additional changes in an effort to alleviate the credit crunch. For example, the Federal Reserve has agreed to directly provide investment firms with emergency loans. Until now, this privilege was reserved only for commercial banks.
The Federal Reserve also lowered interest rates by one quarter percent point to 2 percent back in April. According to James Bullard, who is the president of the Federal Reserve Bank of St. Louis, the central bank does not have any immediate plans to make further cuts in interest rates.
"My sense is that the U.S. economy will be able to post stronger growth in the second half of this year despite the ongoing financial crisis and the drag from the housing sector," he said in a speech at the University of Wisconsin-Madison. "Such growth is likely to make the inflation outlook a more pressing concern for the Fed in the second half of this year."
Nonetheless, lending institutions are still struggling and are finding it difficult to extend credit to borrowers. Until this credit crunch is remedied, the economy will continue to have problems with getting back on its feet.
About the Author: Shannon Kietzman is a well known author and trusted resource. Shannon regularly writes for www.reliacredit.com . For more info and to order your credit report with FREE credit score please visit www.reliacredit.com
Thursday, June 19, 2008
Federal Reserve Auctions Loans to Banks
Tuesday, June 10, 2008
TransUnion Corp May Soon Reach a Settlement for Class Action Suit
In an interesting turn of events, the credit reporting bureau TransUnion Corp has settled a $10 billion class action suit. As a result of the settlement, millions of people may be able to access their credit scores for free while receiving some additional benefits that will help them keep their credit safe.
Why the Lawsuit?
For quite some time now, TransUnion Corp has been battling charges that were filed in U.S. District Court in Chicago. According to the suit, the company sold information about its consumers to a variety of retailers and lenders. The suit alleges that the information was customized to suit the needs of these lenders and retailers, who then used the information for marketing purposes. According to Federal law, the private credit information of consumers cannot be sold unless special circumstances have taken place, such as when a consumer applies for a loan. Therefore, selling this information to lenders and retailers is a direct violation of the law.
What Will Consumers Receive?
If the settlement, which still has to be reviewed in Federal court, is finalized, approximately 160 million people throughout the United States will be affected. Those that are included in the class action suit, which is thought to have the largest number of plaintiffs ever included in one class action suit, will receive free access to their credit scores. Although Federal law currently allows consumers to receive a free copy of their credit reports each year, it does not call for providing consumers with their actual scores.
In addition to receiving free access to their credit scores, the plaintiffs in the case will also receive either six months of the basic credit reporting services and a cash payment or they can choose to receive nine months of enhanced services. The basic service normally sells for $59.75, while the enhanced service includes more detailed information such as an insurance score and a mortgage rate simulator.
How Will Consumers Benefit?
All consumers can benefit from receiving free access to their credit scores and from the credit reporting service. Those that are in financial trouble because of the mortgage collapse or those facing other financial economic problems, however, will particularly benefit from the service. This is because the service provides them will immediate access to their credit information and they can find out their credit scores at any time, which means they can make wiser financial decisions. The service is also set up to notify consumers when changes take place in their files, such as when an new account is opened in their name, which is beneficial when it comes to fending off identity thieves.
Experts in the field are astounded by what TransUnion Corp is offering in the class action suit. Ken McEldowney, who is the executive director of Consumer Action, has referred to the settlement as being “mind-boggling” and “astonishing.” He went on to say, “It’s everything we tell consumers that they need to find out if they have problems with their credit. They are getting information on how to improve it and information about whether they are credit worthy.”
About the Author:
Shannon Kietzman is a well known author and trusted resource. Shannon regularly writes for www.reliacredit.com . For more info and to order your credit report with FREE credit score please visit www.reliacredit.com
Tuesday, June 3, 2008
Reasons to Use a Business Credit Card
Are you a small business owner? If so, you might want to consider applying for a business credit card. Although the interest rates on credit cards can be quite high, if you use your card responsibly and if you pay it off at the end of each billing cycle, having a credit card can be a real asset to your business. Or, if you do need to carry a balance for a period of time, you can take advantage of great introductory offers that will actually provide you with a rate that is lower than a conventional bank loan.
Obtaining Start Up Money for Your Business
Applying for a new credit card in your business’ name can be a great way to help you get the start up money you need in order to get your business off the ground. Rather than go through the trouble of applying for a conventional loan, you can use your credit card to make the purchases you need to get your business started. With many credit cards offering 0% APRs for the first twelve months of membership, you may be able to get your business started and get the card paid off before the interest rates kick in. Of course, if you don’t get the card paid off, you may face a high interest rate. So, make a solid business plan before you start making purchases.
Enjoying the Convenience of a Credit Card
There is no doubt that using a credit card to make your business purchases is very convenient. Most merchants and service providers accept credit cards for payment, which is far easier than carrying around a checkbook or cash. In addition, when you keep your expenditures on your credit card, it is easy to keep track of what you spend each month. In fact, if you choose to get credit cards for your employees, a business credit card will even break down your statement for each employee. That way, you can see precisely what your employees are spending. In most cases, you can even individualize the credit limits for each employee so you can be certain no one’s spending gets out of control.
Getting Credit Card Rewards
There are many potential financial rewards associated with using a business credit card. First, if you use a rewards credit card, you will earn points or cash back for the purchases you make. If you pay off your balance at the end of each month and you have a rewards credit card, you can actually make money with your credit card rather than lose it. In addition, many business credit cards offer discounts with merchants that business owners typically use, such as with stores that sell office supplies. Finally, the fact that your business name and logo can be put on your credit card has the reward of personal satisfaction – and may actually help you find new customers when you pull out the card and the cashier sees your logo on the side.
About the Author:
Shannon Kietzman is a well known author and trusted resource. Shannon regularly writes for www.reliacredit.com . For more info and to order your credit report with FREE credit score please visit www.reliacredit.com
