Hold On To Your Hats And Sunglasses, Here Comes The Credit Card Meltdown

We hope you’re enjoying our current economic roller coaster because it’s likely to continue — According to a new report from research firm Innovest Strategic Value Advisors, titled “Credit Cards at the Tipping Point,” the fun has only just begun. As the credit crunch begins to affect consumers, they’re going to have more difficulty paying their credit card bills. The report suggests that credit card companies’ misleading practices and cavalier extension of credit may come back to bite them. Who should be worried? Capital One.

From The Red Tape Chronicles:

The report by the research firm Innovest Strategic Value Advisors, titled “Credit Cards at the Tipping Point,” predicts that fallout from the credit crunch will lead to a sharp increase in credit card defaults in the coming year, making $1 out of every $10 owed on credit cards impossible to collect. That will force banks to write off nearly $100 billion in credit card debt, it said.

“A long build-up in consumer indebtedness, deteriorating economic conditions and a potential ‘sudden stop’ in credit availability could cause charge-offs to rise dramatically into 2009,” the report says.

Misleading practices by credit card issuers will come back to bite them, say report author Gregory Larkin and Laura Nishikawa, as uninformed consumers who wind up facing surprise interest rate hikes and fees will be more likely to default on their loans. The report concludes that Capital One is most at risk, due in part to its aggressive marketing and “fee-trapping” strategies.

“The data points to an unsustainable business model based on penalty pricing, and the company is worst-in-class by Innovest standards,” the report said.

Some more troubling details from the Red Tape Chronicles:

  • Outstanding credit card debt has grown by more than 75 percent since 1999.

  • More than 50 percent of Capital One’s cards are “low-limit” cards, which Innovest said are designed as fee traps — consumers with low limits are more likely to surpass those limits and face penalty charges. (CEO Fairbank maintains that low-limit cards are simply a smart way to manage risk)
  • Risky borrowers with low credit scores — subprime borrowers — account for roughly 30% of outstanding credit-card debt.

The good news? The credit card market is tiny compared to the housing market, so a “subprime credit card meltdown” wouldn’t have the same effect as our current housing dilemma.

CREDIT CARDS AT THE TIPPING POINT? [Red Tape Chronicles] (Thanks, Doug!)

Comments

Edit Your Comment

  1. howie_in_az says:

    How much will credit card companies be receiving from the government?

    • perruptor says:

      @howie_in_az: How much do you have left?

    • Necoras says:

      @howie_in_az: Likely nothing. As mentioned, the market is much lower. Also, while it’s irritating to lose your 52 inch TV, the government won’t step in to make sure you keep it.

    • Nofsdad says:

      @howie_in_az: Since they’re the same people who brought about the mortgage meltdown (on both sides of the thing) probably about whatever they ask for.

    • zibby says:

      @howie_in_az: One thing you can be sure of is that the smart will end up bailing out the stupid somehow or other – but in a system that appears to reward stupidity, aren’t the smart stupid and the stupid smart?

      Whoa. That’s so deep I just gave myself the bends.

  2. AugustaCassiopeia says:

    Sadly, the folks that are paying their cards on time, every time, get to enjoy the “benefits” of having their credit lines slashed and having a faceless corp that itself engaged in very risky practices, question their ability to pay.. Nice..

    This is the time to cancel those Credit Cards. Show your creditors that you’re not in the mood to pay for *their* recklessness.

    • XianZhuXuande says:

      @AugustaCassiopeia: So far many people who use their cards responsibly are not encountering trouble (though now is not the time to go nuts with credit limit increase requests and new lines of credit). I’ve only been getting more.

      There is a breed of credit card holders that have extremely high credit limits and use only a tiny portion of what they have. They’ve been getting burned a little by companies like American Express with credit limit decreases and closed cards.

      The people who are suffering most are those who carry balances (even at a good APR). They are being seen more as a risk now than before, and are enjoying wonderful practices such as ‘chasing the balance’. If a person has credit card debt, now is a good time to pay it off.

    • Erwos says:

      @AugustaCassiopeia: Huh? Amex just sent me a letter raising my limit by like 25%. I’ve always paid the card off every month. I’m guessing that they just like the way I’ve been charging my school tuition to it. :)

    • neilb says:

      @AugustaCassiopeia: Actually, I recently got better benefits (they were already great) from Chase. I assume this is because they want to keep the lowest-risk customers on their books now more than ever.

      • oneandone says:

        @neilb: Over the past week I’ve gotten about 400% more offers for balance transfers from Chase & Citibank. Now it makes more sense.

    • floraposte says:

      @AugustaCassiopeia: I save a good deal of money by using credit cards, so for me canceling them to send some sort of message would just be cutting off my nose to spite somebody else’s face.

    • pecan 3.14159265 says:

      @AugustaCassiopeia: This is actually a bad time to cancel cards, especially if you’ve been a good and reliable credit card user for a number of years. Reacting to a market change by drastic measures is not a good decision. The best course of action is to continue paying credit cards on time, in full, and if you think they’ll decrease your limit because of other peoples’ mistakes, ask for an increase, and when you get it, stay put.

    • shaman66 says:

      @AugustaCassiopeia:

      All of you assume people *need* credit. Anyone that manages their finances responsibly doesnt *need* credit.

      I have a single CC that I use and pay off monthly. So far, no change. I know 2 other people who do the same and one of them has had their limit cut in half. The other had their limit decreased by about 20%.

      It’s entirely possible that your limits have gone up, but with increasing defaults, do you honestly think they will keep increasing it?

      Sure it makes good business sense to get good payers further on the hook, but I seriously doubt common sense is whats in play @ CC companies right now…

  3. rpm773 says:

    If this means a decrease in the number and frequency of those obnoxious Capital One commercials, I say bring it on.

  4. mizj says:

    How do these companies create a business model that depends on failure in order to profit? It was doomed from the beginning. EPIC FAIL

    • BoomerFive says:

      @mizj: To true…I would just add..

      Epic greed + idiot execs = Epic fail

    • opsomath says:

      @mizj: I agree wholeheartedly. My New Year’s resolution was to minimize dealings with companies whose profit margin depends on my screwing up: fee-trapping banks, credit cards, and mortgage companies, (use cash wherever possible and pay down mortgage at a high rate) cell phones with overages, (prepaid FTW!) Blockbuster, (Net-freaking-Flix) etc.

      It’s made me a happier person.

  5. theblackdog says:

    Yay, let me be irresponsible with my card so that the credit card company can give me a better rate after the credit card companies get bailed out!

  6. shaman66 says:

    Sadly, the folks that are paying their cards on time, every time, get to enjoy the “benefits” of having their credit lines slashed and having a faceless corp that itself engaged in very risky practices, question their ability to pay.. Nice..

    This is the time to cancel those Credit Cards. Show your creditors that you’re not in the mood to pay for *their* recklessness.

    • XianZhuXuande says:

      @shaman66: No… now is not the time to cancel those cards. Don’t give bad advice. It hurts your FICO score and it will only be harder to get credit down the road. Now is the time to use those cards more responsibly than ever before.

      And they don’t care one bit when you cancel your card. Life goes on. You’re the loser in that deal…

  7. edosan says:

    Does this mean since I pay my credit card bills I’m going to miss out on ANOTHER bailout?

    Dang.

  8. ohiomensch says:

    When is anyone going to call BS on the CC companies that manipulate your credit (balance chasing limits so that you are always maxed out, moving due dates so its impossible to pay them the same day each month) so that your FICO score drops, and then ups your interest rate because your FICO score dropped?

  9. Meggers says:

    Fee trapping? I don’t think that I have ever heard that term before.

  10. Sabbadeus says:

    I’m unfortunately one of the ones who has a little bit of credit-card debt to their name, just over 4k from when I moved out west and had to get the apartment all set up and replace my computer that had ended up dying on me. But I can at least say on the positive side that It’s not an old debt and I’ll have it paid off before christmas at this rate since I’m throwing most of what I have at it. On the positive side though, my credit line won’t be slashed if I have that balance on the card still, if anything I expect to see the limit raised so the bloodsuckers can try and get more from me.

  11. Caveat says:

    I just don’t believe the report about Capital One. While other banks have thrown credit cards at me, Capital One has been very conservative. Even after applying I was given a low credit limit which I have not been able to raise. It’s not a big problem though because if I want to exceed my credit limit one month I just go on line I just pay off what I owe when I get close to the limit. I love Capital One because it is one of the few banks that does not take advantage of customers by charging the international transaction fee.

    • ARP says:

      @testsicles: True, but CC companies are using some shady tactics to extract greater fees from you as well. For example, changing the due date to a earlier time impact those pay their balances off every month. It has the side effect of allowing them to raise your interest rates if you happen to carry a balance since you missed a payment and are now a risky borrower. There’s also “universal default” where the CC companies raise your rates because you missed a payment on something else or there’s been a negative impact on your credit score. I’m not saying people shouldn’t be responsible for their actions, they should. But if I use CC’s responsbibly, pay them on time, etc. my CC should not try to trick me or extract extra fees from them. This should apply even if I have a balance. Not all people who carry balances are deadbeats who just can’t maintain discipline.

    • AMetamorphosis says:

      @Caveat:

      That’s because a majority of Crapitol One’s customers rarely leave the trailer park, let alone travel internationally …

      Crapitol One preys on the poor & uneducated consumer and I have watched countless coworkers get screwed when they use Crapitol One …

      On a side note, I am happy that you have been treated well and I hope it continues ! :-)

    • djanes1 says:

      @Caveat: I think one of the points here is that Capital One gives low limits, just so that you are more likely to accidentally go over and have to pay a penalty fee.

  12. kamel5547 says:

    I hate charts that are not clearly defined… this can either be really bad or data used to show what the person wants to show.

    In particular, it looks to me like the chart shows real wages (mean or average) for people, vs total personal credit card debt (not mean or average,based on the label). This is horribly misleading as there is no way to put it in perspective compared to the number of employed persons in the country… yes its still bad, but not as bad as it seems from the chart.

    Just my opinion.

    • oneandone says:

      @kamel5547: The chart also has my pet peeve: sticking the x axis at whatever random point they want to make the graph look more dramatic. Yes, sometimes it’s probably better for showing changes over time that would be much more subtle (or unnoticeable) on a full-scale chart, but I think it’s manipulative.

      Especially since now there are charts of the Dow all over, and even otherwise intelligent people can’t help but get anxious when they see the line crashing towards and almost hitting the bottom. It’s nowhere near the bottom.

      Which is not to say that things are good, but I think perspective is being shoved away by this bad chart-making.

      • urabl says:

        @oneandone: Yes, we don’t know the source data, but as far as the x-axis concern, doesn’t it show that the 1999 version of these metrics was pegged at 100 (in what units, who knows) and then the graph proceeds from there?

    • theyoungandthebetrayed says:

      @kamel5547:
      @kamel5547: @kamel5547: @urabl: @kamel5547: @kamel5547: Though I agree that the chart is poorly made, it seems to me that it respresents percent growth from the base, which was chosen to be 1999 (quite possible because that fit the story they wanted to tell the best). The fact that the line for cc debt is at 175 or so and the summary states that cc debt has risen 75% since 1999 seems to confirm this.

  13. Jonbo298 says:

    Credit card companies need a meltdown. Though a good amount may use credit cards responsibly, alot don’t. Companies prey on these people and they are going to get bit. Companies preyed on people who shouldn’t have gotten mortgages or higher then they should have mortgages and look where it got.

  14. neilb says:

    Worst credit card of all time. Notice the fees.
    They may tap you, or your wallet…or something.

    [consumerist.com]

  15. azntg says:

    @AugustaCassiopeia: Strongly agree with your sentiment. Strongly disagree with your suggestion though!

    It’s like cutting off your nose to spite your face. The credit card companies couldn’t care less what you do to your own face. They’re not the ones getting hurt. Only time your suggestion has a possible chance to work, is if everybody does it without ANY exceptions.

    And trust me on this one, it will never happen. Those with the money (or at least those with the knowledge of the credit system will never do it). Unfortunately, even those on the flip side, will not do it either for various reasons of their own.

    This is the time to make those credit card companies pay, especially if they wronged you when it’s reasonably unwarranted.

    Why close your credit card account? You’re doing EXACTLY what the financial institutions want you to do!

    Not only do you let them get away with it the easy way, you’re further damaging your potential to get credit later in the future.

    Keep the account open and use it once to make a menial charge every 4-6 months. Let THEM pay for the privilege of keeping you as a customer.

    Cash has its place (even more than what some of those on the pro-credit camp will have you believe), but so does credit too (even more than what Dave Ramsey and company will have you believe)

  16. Greeper says:

    I think (1) this is the fault of everyone but the people who are buying things they can’t afford and (2) Congress should just pass a lw making the government pay the credit card bills. ITS OUR RIGHT!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  17. Gopher bond says:

    I think I have more sympathy for predatory mortgage borrowers. There’s lots of stuff in there that can be confusing and buying a house is an emotional time to begin with. But predatory credit card lending? I don’t know how much sympathy I have for people on that front. Cue the SNL skit “Don’t buy things you cannot afford.”

    • magstheaxe says:

      @testsicles: When I was younger it used to be damn near impossible to get a credit card (the old Robert Benchley joke that “in order to borrow money, you first have to prove you don’t need it” comes to mind). But by the time I got to college in the mid-80s, the credit card companies were practically throwing applications at the students, many of whom were poor, or unemployed, or up to their eyeballs in student loans, or some combination of the three. Most of the students had no clue about credit cards–they’d never been educated on them, their parents had never had them–and I knew a few students who got in over their heads real fast as a result.

      It drove home something to me: that we don’t have good economic education in our schools. No one is teaching the young’uns how the credit racket works, and they’re indundated with advertising, so by the time they grow up they’re perfect marks for the CC companies.

      Hopefully this credit crisis will inspire the Millenial Generation to be more like their great-grandparents of the Depression Generation, and learn never to trust people offering you credit.

  18. DWalk says:

    Has anyone studied the South Korean credit crisis of (I think) 1999-2004 and the lasting consequences? If so, could someone point me in the right direction to some info (and no, Wikipedia doesn’t have anything obvious and Google isn’t helping much).

    • satoru says:

      @DWalk:

      [www.iht.com]

      They seem to be doing ok. Though the situation might be different in that most Asian countries have never heavily relied on credit cards previously. So to shift from credit back to cash wasn’t such a hard transition for them.

      It will definitely have an impact on the GDP of America though, since it’s highly dependent on credit in order to create GDP.

      • azntg says:

        @satoru:

        I hear opinions to the contrary on the South Korean media. Things aren’t going too great. And should there be another economic crisis that requires the IMF to step in, the recovery situation will be much worse.

        Koreans are quite heavy credit card users. Just about many developing/modernizing or well developed/modernized country in Asia are too, nowadays. Anybody saying anything otherwise are either living in the past or living in blissful ignorance unfortunately.

        Remember, the saying goes: “When America sneezes, others catch a cold.”

        I have a feeling that at this point, if China sneezes, just about every country out there will catch a cold and many will die from what’s ailing it.

  19. flamincheney says:

    I haven’t had a CC since paying them all off about 7 years ago (my wife keep an emergency card), but after reading what is going on in the economic marketplace I have to wonder what leverage creditors will have as things inevitably get worse.

    If there only recourse is damaging the credit of people who already have damaged credit then why would any of these people pay their balances?

    It seems that the current trajectory is one that creates a grey market for those people who have cast aside/defaulted on credit agreements. You can’t just discard that large a percentage of a consumer base can you?

    It seems that we are stuck in a vortex that no stimulus package or bailout can stop.

  20. Javert says:

    I remember, back in the day, getting a credit card was (1) not easy and (2) a big step to being an adult. Then, for some reason, the companies realized that they could pre-approve everyone, send out mailings, appear at every sporting event and give everyone a card. During the first sign of trouble, they appealed to congress to shore up bankruptcy laws in their favor, making it harder to discharge debt.

    The funny thing is that the CC companies did not change their practice of pre-approving and signing up everyone. Now that there is a serious financial crisis, we are to read reports of all the money they are going to lose and do what? Feel sorry?

    True, it is a two way road and people should not be obtaining credit that they cannot afford but I have to honest…credit cards saved my life when I was laid off from a job after moving across the country so I can see their appeal.

    What sucks to the nth degree as with the mortgage mess, who will pay the most but those of us who are responsible…those who pay off their cards every month; those who did not purchase a house beyond their means; or those (gasp) who did not purchase a house because even a slightly literate primate could see that the housing market was over valued and chose to rent and save money for a time to buy an affordable house.

    Just send me my tab so I can get on with my life.

  21. Notsewfast says:

    I’ve been calling this since the housing market started to look shaky.

    With the home equity lines of credit tapped out, it was only a matter of time before the credit card companies started seeing the same delinquency rates.

    Oddly enough, I think that the economic impact of this is being vastly underestimated. Our buying has become increasingly more leveraged and if consumer credit dries up completely, there will be a huge drop in discretionary spending.

    If this turns into a full-blown crisis, it could be a very bad year ahead.

  22. Squot says:

    See, I have a different problem. I have relatively fair-plus to good credit (686-700), and I have a card with a /ridiculously/ high interest rate. (See also: 26.5%.) from US Bank.

    I received it as a student card, but they kept raising my limit. I’m now working on paying off debt (due to a lack of a job, it’s close to maxed at 4200 out of 4750), but I’ve now got a solid job as a Marketing Assistant and am working to pay it down.

    I really want to transfer the balance, but with the credit crisis, I don’t even know if there’s a good one to be found. My credit should go up further in a couple of months, since they had to do a hard pull for me to get my apartment in August, and I know that drops my FICO.

    Any advice on what in the world I should do?

    • pecan 3.14159265 says:

      @Squot: I’m pretty sure you could find a better interest rate than 26.5. That’s really high. The credit crisis is more of a problem for people who are trying to get credit or people who ae living entirely off credit, and don’t seem to have any prospects of getting out of it – you have a better job now, so you’re not as in the hole as others. Good for you. But I’m pretty sure you can do some digging and find a better interest rate, even if you only transferred some of the balance.

      Anyone want to chime in?

  23. Trai_Dep says:

    Here, in a nutshell, plus the phantom $$ from the housing market, explains much of the economic “growth” of the past eight years.
    How’s The Ownership Society looking now?

    • dweebster says:

      @Trai_Dep: Well in fact, to the ones who have been aiming to “own” more and more of society, they’re probably looking at themselves quite happily right now.

      In the old days, slaves had to be tied up and beaten to conform to their Master’s wishes. Nowadays, Master just “sells” them things and “gives” them credit along with endless propaganda to “spend,spend,spend” in order to be a good citizen – excuse me, “consumer.” Through use of the money spigot the odds are that you will enslave yourself. Hence, the “Ownership Society” owns YOU, no need for chains.

  24. Jevia says:

    I do plan to cancel a couple of my credit cards, primarily because I’ve finally paid off the balance and I don’t want to pay another ‘yearly fee’ for the privilege of having their card (and the companies refused to waive it when I called last year). I’ve gotten a few other cards (that don’t have a fee), so I still have plenty of credit when I need and I don’t anticipate needing a credit score to buy a house or car anytime soon.

  25. bravo369 says:

    the thing that gets me is that there seems to be a lot of reverse capitalism going on. Usually capitalism breeds competition and brings down prices, better service etc. whether we are talking about credit cards, cell phones, airlines, hotels, bank fees, cable companies…they all seem to now be self-serving with little regard for customers.

    Capitalism should be making these credit card companies LOWER interest rates to attract business. They should be fighting each other to offer 0% transfers or guarantees that the interest rate will NEVER go over 10% if you pay more than the minimum each month. Offer services for those who are not payin their bills that for every 3 months you pay on time and more than the minimum, they subtract 1% off your rate. maybe those people will start paying then. Instead their responses are to cut limits and raise interest rates. someone like me who has paid on time and in full for 10 years gets a notice in the mail that they are raising my rate to 21.9%. how does that even make sense in a capitalist market?

    they must all be fighting each other to match profits but I find it hard to believe that Capitalone wouldn’t steal customers from other credit cards if they offered programs like this. apply this notion to any of the other markets I listed above and you’ll see drastic changes in the market.

    • henrygates says:

      @bravo369: Why lower your rate when almost all of your customers seem happy to pay 25%?

      • bravo369 says:

        @henrygates: who’s happy with paying 25%? my point was that they are all playing follow the leader. one airline charges for baggage and they all follow. one bank raises atm fees $1 and they all raise them. One cell phone company raises text rates and others follow suit. Why are none of them coming out with new features to make things faster and cheaper…because they are padding their own wallets and it’s coming back to bite them.

  26. ADismalScience says:

    FYI, Dow component AMEX has the most exposure to risky borrowers in its business and actually functions as a legitimate lender instead of selling debt securities. Which means their vaunted consumer protections will fall in the face of their propensity to extent credit to higher-risk borrowers. The Capital One CEO is right – smaller-limit credit cards might be “fee traps” but they also hedge individual bets on higher-risk borrowers.

    Credit default spikes that take down companies aren’t just a function of evil corporations, in other words. Sometimes, financial corporations just take on too much risk. You can’t draw a straight line from “evil corporations” to “crushed in a wave of default.” Consumers deserve a portion of the blame, no?

  27. BlondeGrlz says:

    My credit card hasn’t really been affected yet (no rate hike, no limit change) but the “amount available for cash advance” has taken a nose dive by 300%, even though my current balance is under $100. I never use cash advances on the card but Discover suddenly seems really concerned that I might.

  28. Nik in Denver, formerly in NOLA says:

    Good. No sympathy from me. I’d like nothing better than to be the one pulling the trigger while the CC companies are lined up against a wall. You want to preapprove everyone? This is what you get.

    Maybe I’d have more sympathy if they wouldn’t keep jacking up my rates unilaterally. I love how my minimum APR is now 17.99 (originally like 11.xx after the 0% for 18 months, then 14.xx after the first card expired, then 17.99 minimum after the second card expired). Not like my credit isn’t good either. Its actually gotten better. Yeah I love being rewarded for a high score with a higher rate. Nothing will make me happier than goose-egging this card (racked up some debt while displaced post-Katrina) next year.

    • dweebster says:

      @Nik in NOLA: Yeah, once you step onto the quicksand instead of receiving a rope they toss weights at you.

      Airline miles, “cash back,” and “it’s only for an emergency” are just some of the bait they use to walk you toward the goal of the quicksand.

  29. satoru says:

    I’d be surprised if Amex was affected much by bad debt? Unless they have a ton of people on their credit cards, instead of on their old charge card system. To be I’d prefer if Amex dumped all the credit card people and just stuck with the charge card. I saw it as a brand dilution when any moron, like myself (haha), could get an Amex card. There’s a reason why Nieman Marcus only takes Amex.

  30. postnocomments says:

    A credit card crash is the best thing that could happen to the economy. People will be forced to live within their means, banks will have to stop giving credit cards to any idiot who wants one and banks who milked their customers into insolvency will be penalized (unless the government bails them out). Credit cards now make business based on the same principle that has Wall Street down to its knees: greed and stupidity.

    • dweebster says:

      @postnocomments: Aren’t we taxpayers bailing out the banks no matter what now anyway? Upped the FDIC amount to 1/4 million and insuring money markets and such. I’m sure the credit cards they issued willy-nilly will become our problem too as soon as the bankers extract their last pennies out of THIS financial ruse.

  31. SaryuCopreus says:

    If you have good credit, you definitely wouldn’t want to cancel any credit cards, especially now. Your good credit score is based off your lines of installment and revolving accounts. Credit cards are revolving accounts. When you go and cancel and perfectly paid, good line of credit that has been open many years, you run the risk of a serious drop in credit score. Be smart, dont have too many cards, keep all your balances under 30% and try to pay them all off. Then, the credit card companies have nothing on you and you are using THEM for your benefit, instead of the other way around!

  32. Trencher93 says:

    If this means the end of unsolicited credit card offers, can they go ahead and implode now? Why wait?

    • dweebster says:

      @Trencher93: Tell the credit bureaus NOT to share your information with these morons. I haven’t seen a solicitation in years. Don’t need the exposure to identity theft, and figure a few extra trees and less toxic waste in the world can’t hurt either.

      If I need to get another credit card I think I can find SOMEPLACE that offers them.

  33. ChristineBrocchus says:

    I’m in a bit of an odd situation here. I am in my mid 20′s and have never had a credit card. Growing up, my parents were very anti-credit, and a lot of that has stuck with me. The problem I am running into now is that I am in my mid 20′s and have a very limited (but not bad) credit history. I know it’s getting tougher to apply for credit. Will that keep me from building up what I need to get into a house someday?

  34. Marshfield says:

    I’d say the credit card companies have significantly less exposure than they used to a couple years ago, ever since the bankrupcy laws were re-written. People tempted to do BK will be stuck under ch. 13 and forced to repay some or all of it. Back in the good ol’ days you could throw 30K of CC debt on the Ch 7 bonfire and walk away.

    • dweebster says:

      @Marshfield: Yeah, Joe Biden’s MBNA/Bank of America law that did this sure motivated the credit card lending banks become responsible themselves, eh?

      When wages are depressed and the few choices are borrowing or crime, it’s sort of inevitable that at least some people will choose to borrow.

  35. dweebster says:

    With unexpected medical expenses leading to most bankruptcies, and most medical providers accepting credit cards, there’s probably some correlation there, too.

    Yet another illustration why the USA needs to finally grow up and implement Universal Health Care rather than waste all this money running around bailing out organizations who have profited from people’s illnesses.

  36. nicemarmot617 says:

    Today I discovered that American Express reduced my credit limit by $5500 without alerting me, putting me within less than $100 of my new, massively lower limit. I used my Amex for just about everything and paid my bills in full each and every month. I never missed a single payment on my Amex (or anything else for that matter). I have been trying to contact them all day to demand why they would do such a thing, particularly with no warning. They didn’t even send me an email alert or put a notice in my account – I discovered it when Mint alerted me that I was $91 away from my credit limit.

    At first I thought it might just be a Mint error, but when I logged into the Amex site, sure enough, my credit was all used. I’ve tried calling them twice already and both times gotten a “due to greater-than-average call volume, your hold time will be more than…” message. I guess they did the same thing to a lot of other people. If they do not immediately correct this they have lost a lifelong customer (and my previous credit limit was fairly high considering I’m only 25). My boyfriend is going to cancel his account as well. I don’t expect that they will fix it, after all, doesn’t “screw you, we have to protect our bottom line” win every time?

  37. ChuckECheese says:

    I’m working at a debt settlement company as a temp right now. Business is BOOMING. The number of accounts some people have is staggering. And yes, CapOne is taking it on the chin bigtime. They turn up in about 40% of all the accounts I review. Every once in an occasionally I look up from my overwheming pile of files and wonder how the CCs will deal with the loss of all this income.

    Disclaimer: This post in no way is an endorsement of debt settlement companies or their services. Kelly is my mack momma, and I go where she tells me else I get beat with a radiator hose.

  38. HooFoot says:

    Don’t cancel your cards in protest–you’re more unprofitable to the credit card companies by paying off your balance in full every month. They’re forced to spend money to managing your account–mailing statements, customer service, maintaining online banking, etc.–while getting nothing in return.

  39. redkamel says:

    well, when you base your whole business around getting people in debt who cant afford to pay it back…

  40. ageshin says:

    I find all this interesting at a time when there are stores who will not take cash, but insist on the old credit card. The banks have worked hard to make the credit card endemic to our society, a great pipe line in which the wealth of ordinary people is drained into their coffers. Even for people who pay their bills in full the banks take their profits in taxes (fees and intrest). King George of good old England would be astounded that the colonies would sit by and accept this, taxation with no representation, with not a wimper. Of course, when the pipeline runs dry, they will run to the taxpayer, already the victom at the credit end and demand to be saved from their own greed.

  41. Amy Alkon000 says:

    I don’t understand people who don’t have credit cards — it’s the single safest way to pay your bills. Why not just exercise personal responsibility and that long-lost practice of self-discipline, as I do every month: using my credit card as a debit card, never buying more than I can pay for. Because I do that, and have savings because of it, when unforseen expenses come up (like $800-some dollars for my trademark going final and the associated Federal and lawyering costs) I’m able to pay them, in full.

    That said, I will resent the hell out of whatever politician or politicians make people like me, who live frugally, pay for all the spendthrifts. The banks who gave the credit should suck up the losses. As a lesson and because they deserve to do it. You speculate financially, you take the soaking.

    Me? I buy $49 Target dresses for eBay for $15, and switch the PayPal payment to my credit card, and even pay my phone bill on my credit card, and then pay the credit card in full every month.

  42. johnfrombrooklyn says:

    This chart appears to be misleading at first. Real Wages usually assume adjusted for inflation. So this chart at first glance appears to show wages adjusted for inflation while credit card debt was not adjusted. However, it appears that in fact the credit card debt has been adjusted for inflation. The graphic isn’t showing anything in absolute terms but is showing it in proportional terms. This is my long way of saying, we’re f***ed.

  43. lmo says:

    So should I just pay off my card and cut it up? Or continue to use it and pay it off on time to build credit?