Consumers Feel the Next Crisis: It’s Credit Cards
1. Eric Dash
2. Consumers Feel the Next Crisis: It’s Credit Cards
3. The New York Times
4. October 29, 2008
5. After years of flooding Americans with credit card offers and sky-high credit lines, lenders are sharply curtailing both, just as an eroding economy squeezes consumers.
6. Credit card crisis is affecting costumers and threatens is already beleaguered banking industry with another heavy losses. Lenders wrote off an estimated $21 billion in bad credit card loans in the first half of 2008 as more borrowers defaulted on their payments. Currently, the total losses amount to 5.5 % of credit card debt outstanding, and could surpass the 7.9 percent level reached after the technology burst in 2001. Lenders are shunning consumers already in debt and cutting credit limits for existing cardholders, especially those who live in areas ravaged by the housing crisis or who work in troubled industries. At the same time, the fear among lenders has deepened just as the crisis makes it harder for some financially stretched consumers to wean themselves from credit cards for even basic needs, like gas and food. Online credit card applications have fallen for the first time in five quarters, in part because customers are receiving less mail offers that drive them to the Web, according to data from “comScore.com”. Another factor is that the interest rates banks charge even creditworthy borrowers have come down after the emergency actions taken by the Federal Reserve to ease the credit crisis.
7. In my opinion increasing interest rates and reduction of credit to worthy customers is just the wrong approach now. It will create problems for those who have high credit scores at a time when these are the type of customers the credit card companies want to keep. I agree that to the government, that action is necessary by the credit card companies.
This is important to everyone whit credit card who...