CONSUMER NEWS    RECALLS    COMPLAINT FORM    SCAM ALERTS  
Small Claims Guide   Class Actions   Lemon Laws   FAQ   Newsletters  


Complain about a product or service

Automotive    Education    Electronics    Family    Finance    Health    Homeowners    Shopping    Travel   
NEWS   Latest |  Archives |  Auto |  Cells, etc. |  Computers |  Financial |  Health |  Homeowners |  Parents |  Privacy |  Scams |  Seniors |  Travel

Industry May Cut $2 Trillion in Credit Card Lines

Bad economy, risk aversion causes banks to pull back



By Martin H. Bosworth
ConsumerAffairs.com

December 1, 2008

Credit Tips And Tricks
Get Control of What You Owe
No Easy Way Out Of Credit Card Debt
Penalty Fees, Interest Rate Hikes, and Misleading Contracts Await Credit Card Shoppers
"Convenience Checks" Carry a Heavy Price Tag
New Forms of Credit Scoring
Understanding Credit
Credit Bureaus: Who You're Dealing With
Reading Your Credit Report
Credit Scoring: The Fickleness of FICO
Credit Knowledge: A Long, Hard, Struggle
---
News
Consumers Resolve To Kick Credit Card Habit
Credit Card Issuers Changing the Rules
Credit Card Rules Implemented Too Slowly, Groups Say
Feds Crack Down on Credit Card Companies
Fed to Vote on Sweeping Credit Card Rule Changes
Credit Card Cutbacks Hit Consumers Hard
Industry May Cut $2 Trillion in Credit Card Lines
Credit Card Offers Fall Sharply
Are Credit Cards The Next Credit Crunch?
House Passes Credit Cardholder's Bill of Rights
New College Students Face Money Management Challenges
Survey: Americans Cut Back On Credit Cards
House Committee to Consider Landmark Credit Card Legislation
Survey: Banks Change Credit Card Terms "For Any Reason"
Are You Being Squeezed Dry by your Child’s Credit Card Debt?
30,000 Consumers Weigh in on Abusive Credit Card Practices
---
More about credit cards

Credit cards have become as synonymous with America as baseball and apple pie--but those days may be coming to an end. According to one industry analyst, the financial industry may cut as much as $2 trillion in credit card account lines over the next 18 months in order to reduce risk of damage from increasing delinquencies and defaults.

"[W]e expect available consumer liquidity in the form of credit-card lines to decline by 45 percent," Oppenheimer & Co analyst Meredith Whitney told Reuters news service.

Whitney reported that all three of the remaining major banks--Bank of America, Citigroup, and JP Morgan Chase were planning or considering reducing credit lines across the board.

Whitney said that credit cards were the second source of liquidity available to consumers, behind wages from work. She criticized the banking industry for offering ever fewer choices at a time when consumers would need credit more than ever.

"Pulling credit when job losses are increasing by over 50 percent year-over-year in most key states is a dangerous and unprecedented combination, in our view," Whitney said.

A contraction in available consumer credit has been predicted for several months since the scope of the economic crisis became apparent. Banks and lenders, exposed to enormous potential defaults from the slumping housing market, began cutting back on credit card account lines while simultaneously raising interest rates, even for the best customers who paid on time and exhibited no risky behavior.

Banks and lenders' ability to change the terms of credit card agreements for any reason has shocked many cardholders, who saw their interest rates double or even triple in recent months despite good payment behavior.

Although the credit pullback has had the welcome side effect of reducing the number of credit card solicitations people get in their mailboxes, it still represents a potentially dangerous economic shock that could rival--or surpass--the slump born from the housing market.

Several studies have confirmed that Americans are cutting back on buying luxuries with credit cards, using them to buy necessities instead--and that more cardholders are having trouble keeping up with their payments.

Whitney recommended several solutions for the lending crisis, including a return to local lending and knowing customers' business histories, rather than relying on automated credit scoring systems.

The House of Representatives also passed a "Credit Cardholder's Bill of Rights" that would restrict particularly egregious billing and penalty traps last year in the waning days of Congress. The bill was put aside to focus on negotiations for the financial industry bailout, and no word has emerged as to when it will be taken up again.



Report Your Experience
If you've had a bad experience -- or a good one -- with a consumer product or service, we'd like to hear about it. All complaints are reviewed by class action attorneys and are considered for publication on our site. Knowledge is power! Help spread the word. File your consumer report now.


Consumer News

January 7 2009

Recent Recalls & Safety Alerts

PRINT, MAIL, ETC.


FREE CONSUMER NEWSLETTERS

The Daily Consumer
Afternoons M-F

Sign up now!


Consumer News & Alerts
Every Sunday

Sign up now!

MOST-VIEWED PAGES

  • Speed Up Your Metabolism
  • NutriSystem
  • Sharper Image
  • Bromalite
  • Maytag Washers
  • Fiber Providers Are Leading Choice
  • Select Comfort
  • Wal-Mart Vision Centers
  • Sears Auto Centers
  • Lending Tree
  • NEW COMPLAINTS

  • Aerogrow
  • Uggbuy.com
  • Scooter Depot
  • Scooter Escapes
  • Thane H2O Mop
  • Game Crazy
  • Memorex
  • National Travelers Service
  • Autopartsgiant.com
  • Autopartswarehouse.com
  • Scootercatalog.com
  • Perfect Flame Grills
  • Camera Whiz
  • Hey there! ConsumerAffairs.com is using Twitter.
    Twitter is a free service that lets you keep in touch throughout the day. Join today to start receiving ConsumerAffairs.com's updates.



    Back to the top |

    Advertisement



    AUTOMOTIVE
    • Dealers
    • Manufacturers
    • Service
    • Extended Warranties
    • Lemon Laws
    • Recalls
    • Tires
    • Transporters

    FAMILY
    • Aging
    • Children, Parenting
    • Recalls
    • Dating
    • Education
    • Entertainment
    • Pets
    • Weddings
    FINANCE
    • Annuities
    • Banks
    • Credit Cards
    • Debt Collection
    • Debt Counseling
    • Insurance
    • Investing
    • Loans
    • Mortgages
    • Payday Loans
    • Student Loans
    • Tax Prep

    HEALTH
    • Drugs, Pharmacies
    • Health Clubs
    • Hearing Care
    • Hospitals
    • Nursing Homes
    • Nutrition, Diets
    • Vision Care
    • Weight Loss
    HOMEOWNERS & RENTERS
    • Appliances
    • Cookware
    • Furniture
    • Home Improvements
    • Lawn & Garden
    • Movers
    • Pools & Spas
    • Realtors, Rental Agents
    • Recalls
    • Utilities

    ELECTRONICS
    • Cable TV/DBS
    • Cameras
    • Cell Phones
    • Computers
    • Home Electronics
    • Internet Access
    • Local Phone Service
    • Long Distance
    • VoIP
    SHOPPING
    • In-Home
    • Online
    • Retail Stores
    • Sporting Goods
    • Supermarkets
    • Telemarketers

    TRAVEL
    • Airlines
    • Bus Lines
    • Car Rental
    • Cruises
    • Hotels
    • Travel Agents
    • Trains

    RESOURCES
    • Class Actions
    • Complaint Form
    • Small Claims Guide
    • Lemon Laws
    CONSUMER NEWS
    • Latest News
    • Automotive
    • Telecom
    • Financial
    • Health
    • Homeowners
    • Scams
    • Seniors
    • Travel
    • More ...

    RECALLS
    • Automotive
    • Children's Products
    • Drugs
    • Food
    • Household Products
    • Sporting Goods

    ABOUT US
    • FAQ
    • Privacy Policy
    • Advertise With Us
    • Newsroom
    • Syndication
    • Terms of Use

    Terms of Use Your use of this site constitutes acceptance of the Terms of Use

    Advertisements on this site are placed and controlled by outside advertising networks. ConsumerAffairs.com does not evaluate or endorse the products and services advertised. See the FAQ for more information.

    Company Response Welcome If complaints about your company appear on our site, we welcome your response. Please see the Response Form for more information.

    For more information, see the FAQ and privacy policy. The information on this Web site is general in nature and is not intended as a substitute for competent legal advice.  ConsumerAffairs.com Inc. makes no representation as to the accuracy of the information herein provided and assumes no liability for any damages or loss arising from the use thereof. 

    Copyright © 2003-2008 ConsumerAffairs.com Inc.  All Rights Reserved.    The contents of this site may not be republished, reprinted, rewritten or recirculated without written permission.