The New York Times has an article detailing what promises to be the next fun financial crisis — credit card debt! Apparently, credit card companies have only just now realized that you people are broke! Whoops.
Last time this happened, during the dotcom bust, the companies just raised fees to compensate for all the defaults. The trouble is, they’re probably not going to be able to get away with it again.
In previous downturns, banks could make up the missing profits by raising fees. This time, there may be less room to maneuver.
“The last time credit costs spiked, the late fees were much lower, so card issuers could turn to that and reprice more nimbly,” a Morgan Stanley analyst, Betsy Graseck, said. “There is just more scrutiny now, and coming after the subprime mortgage crisis, the world is more sensitive to the way lenders behave.”
There is an upside to all of this, of course, the number of pieces of junk mail the average American receives has fallen dramatically.