Though the fees are high, they do serve a purpose which is why there is a market for them. People with credit problems have trouble getting credit cards and these types of credit card accounts are good for building credit as long as payments are made on time.

With the passage of the new Credit CARD Act, consumers can expect to see some changes to the subprime card account conditions. For examples, interest rates are expected to go up, and in many cases they already have increased. There are also companies issuing these cards that have already changed the interest rates from fixed to variable. In fact, there will probably be all kinds of new fees showing up on all credit cards and not just subprime cards.

The problem is that the fee-harvesting cards already have high rates of interest and fees so increases make the cards even more expensive to hold. The National Foundation for Credit Counseling is not happy with the increasing fees. As a spokesman so aptly point out, people using these cards are often people who have trouble managing their debt. Adding more fees to the cards only makes the situation worse.

There are some requirements of the new law that will benefit the subprime card holders. For example, the fees to obtain the card cannot exceed 25 percent of the approved limit during the first year. There is a catch though. The fees can be assessed at 50 percent of the approved credit limit but must be spread out over at least five billing cycles.

The subprime credit card companies are bracing for a lower level of business in 2010. In fact, First Premier says it expects the number of new monthly accounts to drop from 200,000 to 20,000.

The new law requires credit card companies to be more honest about how they describe their interest rates and fees. Full disclosure in understandable language is required. For example, instead of saying the interest rate is 10% and the fees are $147, the company must say they charge 75 percent interest the first year.

The Credit CARD Act rules are going to probably result in some subprime card companies going out of business. Though the cards do not have the most desirable fees, they do serve a particular market that needs the service. People who use these types of cards often do so just to rebuild credit. Once the credit score is restored, the consumer can drop the card and get another that is not subprime.

During 2010 there will be a lot of changes in the credit card industry. The full impact will not be known for many months.

Following the heavy hit the credit markets suffered last year which prompt a government effort to stop the nation’s financial system from totally collapsing, interest rates have reached historic lows.

Yet, before everyone get an itch to run out and get financing, it is important to note that financial institutions are making it far more difficult to obtain a loan than they have in recent year. In fact, banks are requiring more collateral, larger down payments, and very detailing financial histories from prospective borrowers.

Worse, these requirements are for those with good credit. It indicates that everyone else may be out of luck. Restrictive lending may be the norm for the near future. According to some figures, almost 7 out of 10 applications were approved and financing book of 2005, but that number had dropped to 5 by the end of 2008.

Credit card debt, and other revolving credit, dropped $6.1 billion or 8% on an annualized basis. This may mean that consu mers are struggling to find available credit so they must reduce their spending.

Certainly, businesses and consumers alike are now finding it easier to get a loan now than when the crisis was at its peak late last year. However, those improvements may be somewhat misleading. Lending – particularly for housing – is being reinforced by money provided by the federal government.

The Federal Reserve has provided low-cost loans to banks across the country totally about $340 billion. In addition, the central bank bought $625 billion worth of mortgage-backed securities to help cut down the interest rates for housing loans. The FDIC has offered to guarantee $300 billion in bank debt; it would be another way to help banks borrow at lower interest rates.

Yet, there is debate about how long this government aid should last. Timing seems to be a major area of contention. There are no clear answers since analysts appear to be split over how soon is “too soon” and what consequences there might be for the lending markets if support is withdrawn prematurely.

As part of announcement made later in the afternoon, the Federal Open Market Committee voted 10-0 to keep the target federal-funds for interbank lending at a range of 0 to 0.25%. Spokesmen from the Federal Reserve mentioned that it was keeping rates at lower levels for the time being.

Policy makers at the Federal Reserve did however note some signs of economic stability. According to the Federal Open Market Committee, the central bank’s policy group, the economy is “likely to remain weak for some time.” Additionally, the FOMC said that consumer spending is still restricted and many businesses are making cutbacks on employees and investment.

Although the statement did little to affect most sectors of the economy, there were a few exceptions. Traders have said that the Federal Reserve’s moves were largely expected. With Federal Reserve Chairman Ben Bernanke, beginning to take a more proactive approach to ensure any policy changes wouldn’t surprise investor unduly.

With investors eyeing the shifting balance between deflation and inflation, there seems to be little certainty about where things will come to rest. This makes for a difficult waiting game in which the Federal Reserve must take some action.

The up and down motion of the trading day was influenced by early positive predictions, but the balance with the final results after the Federal Reserve’s statement be less advantageous. Stocks have been on decline for the last few weeks; this was caused mostly by the sentiments of investors searching for signs of genuine economic growth.

Ultimately, the statement did not represent any radical shift’s in Federal Reserve policy, but underscored that the central bank is fine with letting a gap widen between official rates and the Treasury yields established by traders during a given market day.

This strategic maneuver, deftly employed by the FOMC, or Federal Open Market Committe, closely trailed a .5% cut in the month of January and brought the total federal funds rate down to the lowest level established since late 2004.

This action, being the sixth consecutive cut to interest rates these past two years, was done with the goal of promoting consumer spending and borrowing in order to boost the lagging economy and recharge the financial landscape, thus improving buying power across the board.

Originally, the federal government was rumored by several economic analysts to cut rates a full percentage point, but this wasn’t the case. The federal government has spoken on this issue and said that they believed such an action would of brought on too much inflation and ended up thwarting their intentions.

Despite the moderate cut, plenty of financial leaders are optimistic about the results, saying that the cut in interest rates should be a very welcome opportunity for consumers to take advantage of low rate credit cards and even some loans, considering that there are plenty of new opportunities for some of the lowest rates out there.

Indeed, it seems that since the prime rate has fallen, interest rates everywhere should also likewise see a sharp reduction, bringing a great deal of relief to a large portion of the consumer market. It is believed that interest rates will fall approximately .75% on almost all variable rate cards.

The federal government, despite the optimism present, remains conservative on the issue and have adapted a “wait and see” approach to the matter. A government representative has said that inflation has elevated in recent history, and that some expectations for further inflation are expected to decrease as the year goes on. In doing so, this matter should reduce the cost of resources and relieve the pressure on consumers anxious about the current status and outlook of the economy.

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