January 01, 2009
-
News: Different Year, Same Stuff.
Well, it's another year. Worsening economy, housing market still in ruins and poor credit card industry still biting the dust. Some are even projecting a complete meltdown, let's hope not. With consumer confidence already dragging on the bottom, the loss of credit card liquidity could cause all the other problems to fall even faster. November's results for Capital One are showing another jump over October in credit card delinquencies from 4.48% to 4.7%, mostly due to job loss. Charge-offs are even worse (and more serious). They have jumped from 6.54% in October to 6.98% in November.
The major credit card lenders like American Express, Citigroup and Bank of America are having to respond by jacking interest rates and cutting spending limits. Oppenheimer & Co analyst, Meredith Whitney is forecasting a cutback in consumer credit availability next year as high as $2 trillion. So, what can we do as credit card consumers to protect ourselves?
A few things. For one, when opening a new credit card account, make sure you understand all the fine print. As of yet, banks are still allowed to word things in a way that can fool you. If you're doing well now, don't make waves, just maintain what you're doing. Don't do anything to upset a good rating and, above all, don't be late on a payment. Things could fall apart quickly.
New government regulations have just been released and are to be implemented by 2010. There is some good and some bad here. The good is that there will be much greater consumer protections for credit card holders. The bad news is that the industry is already up against the ropes and these new regs threaten it with, what they call ‘substantially greater risk'. Since the industry will no longer be allowed to arbitrarily jack interest charges. The industry contends that it hasn't abused this license, but it uses this measure to keep their risk balanced. Taking that away, as well as other safety measures they have been using, they're left with only options that no one will like – cutting availability. The Federal Reserve is warning that these measures may cut industry-wide availability by $981 billion and disqualify 45 million American consumers from getting accounts.