The US has entered its first major economic recession for 16 years, according to investment bank Merrill Lynch.

Merrill is the first of the big banks to declare that a recession in the world’s biggest economy is already underway. David Rosenberg, the bank’s chief North American economist, claims that the weakening employment scene and declining retail sales show that the economy has tipped into its first month of recession. [A recession is defined as two successive months of negative growth].

Rosenberg says,”According to our analysis, this isn’t even a forecast any more but is a present day reality”.

For an analysis of the coming recession on both sides of the Atlantic see John Evans’s article in Syntagma.

He writes, “All banks are now hoarding cash like Ebeneezer Scrooge on a bad day and virtually ceasing to lend. With house price indices slithering down a slope like novice ice skaters, and inter-bank rates running at around 8 percent, this has become a total banking crisis worldwide, and that has the potential for real evil in our economies.”

Read the article here.

Credit cards are easy, right? You have a credit limit. As long as your balance isn’t as high as your credit limit, you can pay for things with your credit card. When you pay for something with your credit card, you don’t have to pay for it until later. You pay interest on your credit card balance and as long as you don’t go over your credit limit, everything’s fine.

Well, not quite. Here are some of the most frequently asked questions about credit cards — and their answers, of course.

What’s interest?

In a nutshell, interest is money that you pay a lender for the privilege of using HIS money to buy something.

What’s this about “interest rates” and percentages?

The interest rate is a way of determining how much you’re paying for borrowing money on your credit card. It’s stated as a percentage of the outstanding balance on your card, usually as an APR or annual percentage rate. The lower the APR, the less interest you’re paying on the amount you owe.

Okay — so why would anyone choose a credit card with a high interest rate?

Most people don’t CHOOSE to pay a high interest rate. The bank decides what interest rate it will charge you, usually based on how much of a “credit risk” you are. They determine that by looking at your history of paying bills. If you’ve got a history of paying bills on time, then you’ll qualify for lower interest rates. If you haven’t ever had any bills to pay, or if you’ve had trouble paying your bills, that will show in your credit history, too. Since it’s a little riskier to lend you money, banks will charge a higher interest rate.

One other reason that people might actually choose a credit car with a higher interest rate is for the rewards or privileges that come with that card. If the card includes special perks that you want, they may offset the higher interest rate and make it worthwhile.

My card says that I pay interest on the “outstanding balance”. What does that mean?

Your outstanding balance is the amount that you owe altogether on your credit card. Credit card companies generally calculate what’s called an “average daily balance” for each month and base your interest charge on that. If you had a $50 balance from the first of the month to the twentieth, then charged a $400 computer, your interest will be computed on the average between 20 days at $50 and 10 days at $450.

What’s the “minimum payment”? As long as I pay that, I’m fine, right?

The minimum payment is the lowest amount that the credit card issuer will accept toward your balance. It varies from month to month, depending on your balance. Paying JUST the minimum balance may keep your credit card active and keep the credit card company from reporting your account as delinquent, but it will barely make a dent in the amount you owe. Whenever possible, you should pay more than the minimum amount. In fact, it’s best to try to pay off your balance in full each month to avoid paying interest charges.

The Stop Unfair Practices in Credit Cards Act of 2007 may be some of the best news consumers have had in a long time.

Introduced by Senators Carl Levin and Claire McCaskill, the bill would put legislation in place to halt the most abusive practices of credit card lenders, some of which actually prevent a consumer from ever paying off the debt. The legislation could save consumers millions of dollars in unfair penalties, fees and interest.

If a credit card holder pays off a portion of the debt during a grace period, the bill would prevent the lender from charging interest on the paid-off portion of the charges. It also restricts the charging of repeated over-limit fees for a single instance of exceeding the credit card’s limit. Additionally, lenders would be prohibited from charging interest on over-limit and late fees.

As to penalty rates on interest, those that are incurred by late payments, there is a cap that prohibits lenders from raising the interest rate by more than 7 points, eliminating double and triple interest rate hikes that could be charged after only one late payment.

Read the provisions of the proposed bill:

Stop Unfair Practices in Credit Cards Act of 2007

If you have lost your credit card or fear it may have been stolen, notify the issuer of the card as soon as possible. Under US law, once you have notified the credit card company that your card is lost or stolen, you are not responsible for unauthorized charges. Your liability for charges on a lost or stolen card is limited by law to $50.

Although many people are aware of this, still unscrupulous scamsters may try to sell you credit card loss insurance protection. Using telemarketing schemes to sell worthless insurance, these scamsters can cost consumers dollars to protect what is already protected by law. Often they will tell people that the law has changed, and they are now responsible for all unauthorized charges.

The best defense you have against scam artists is knowledge. When you hear someone telling you something that doesn’t agree with what you know, be on your guard. Read your credit card agreement and know the terms of your account and procedures for dealing disputed charges. List your phone number on the National Do-Not-Call Registry. Remember, never give out your account number, social security number or any other personal information over the phone unless you are sure of the business that you are dealing with.