Wednesday, October 29, 2008

Consumers Feel the Next Crisis: It’s Credit Cards


Indeed it is. If you're not in top shape for the credit card shakeout that's already taking place, there isn't much you'll be able to do about it. It's probably already too late. After years of flooding the market with credit cards (and generous limits), banks are finally starting to take it back. Eric Dash, a New York Times reporter, does an excellent job of distilling the situation.

From the story:

Big lenders — like American Express, Bank of America, Citigroup and even the retailer Target — have begun tightening standards for applicants and are culling their portfolios of the riskiest customers. Capital One, another big issuer, for example, has aggressively shut down inactive accounts and reduced customer credit lines by 4.5 percent in the second quarter from the previous period, according to regulatory filings.

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. In some cases, lenders are even reining in credit lines after monitoring cardholders who shop at the same stores as other risky borrowers or who have mortgages from certain companies.

You can read the entire story here: Consumers Feel the Next Crisis: It’s Credit Cards (link here)

You can also listen to an interview with Eric Dash (link here). He was interviewed by one of his colleagues at The Times. The interview relates to today's story.

Enjoy.

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12 comments:

athensguy said...

Hopefully they'll be handing me the limits they take away from the rest! Citi, Chase, and Discover have all given me CLIs in the last few months.

GlobCredit.com said...

Athens, all is well here, too. Knock on wood.

Marilie said...

No CLIs here, but no CLDs, either. I check my Amex accounts every morning, lol.

azntg said...

In my opinion, credit standing tightening is long overdue.

Personally, I believe everyone who has a reasonable means of repaying a loan (even in nontraditional ways; perhaps except for NINJA loans) should be able to get a loan at different terms.

However, just giving money to anybody without as much as a perfunctory check was outright stupid. But then again, so is just trying to suddenly yank ALL the money back well after the fact.

Apparantly, calm and controlled manner doesn't mean anything to them (Calm and steady wins the race!). Neither does history (American Express, remember the 1963 Salad Oil Scandal?).

Banks are acting like panicking people in a building engulfed in flames, each of them trying to squeeze through an narrow escape hole at the same time. You know what the outcome will be if this continues: Only a lucky handful will survive and everyone else will die. Same scenario, but everyone being calm and controlled, more people will make it out, shaken, but otherwise fine.

GlobCredit.com said...

I did get a CLI from Wamu. Shocker. Otherwise, nothing else to report.

athensguy said...

Also, the fed just cut the fed rate by .5%!

GlobCredit.com said...

Jim (Az), you're spot on with your analysis. So far I don't see calm and collected. I guess bankers are shooting for helter skelter instead.

athensguy said...

There's a pretty cool little graph on charge offs in this story on the fool's site.

http://www.fool.com/investing/dividends-income/2008/10/28/a-rising-trend-that-could-hurt-banks.aspx

GlobCredit.com said...

Athens, I have a story just out highlighting the interest rate cut.

GlobCredit.com said...

http://GlobCredit.com/2008/10/does-your-credit-card-have-interest_29.html

TheVibeRAIDER said...

"lenders are even reining in credit lines after monitoring cardholders who shop at the same stores as other risky borrowers"

What stores are they, specifically?

GlobCredit.com said...

Virgil, none of us know. And the creditors aren't telling us. You know how it goes.

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