Credit Cards » Credit Card News » Credit On The Decline As Economic Crisis Continue
Date June 14, 2009

Credit On The Decline As Economic Crisis Continue

With employment problems and a struggling economy to deal with, more and more American consumers are seeing their credit cards as their last life line. Unfortunately, as credit debt problems continue and credit companies try to secure their future profitability when the credit card bill comes into play, credit is drying up at an alarming rate.

Credit On The Decline As Economic Crisis ContinueEquifax, a company specializing on providing credit data to credit companies and similar companies recently released data showing that access to credit cards have considerably diminished. Charge limits for existing credit cards have lowered significantly as well.

According to Equifax’s data, the number of credit card accounts in the U.S. was 365 million accounts for last month. In comparison, the number of accounts in June last year was at 440 million accounts. Credit card companies have also drastically reduced the available credit, withdrawing more than $600 billion in available credit during the past year alone. In May, the available credit stood at less than $3 trillion.

While diminishing available credit, credit card companies are also lowering their risks on existing credit cards. Credit card balance limits are being lowered and balance chasing is beginning to be a real problem for credit cardholders.  Credit card companies are also applying stricter rules on who can avail of credit cards.

Credit card companies are hoping that, by limiting available credit, they can minimize their exposure to risk and recover from the damage caused by the increasing number of delinquencies and defaults. However, judging by the numbers provided by Equifax, delinquencies still continue to rise. Last month, the figures for delinquencies in the U.S. were at 4.79%. Delinquencies have been on a steady rise for the past four years. Compared to figures from 2005, the delinquency rate has almost doubled.

As this continues, consumers are losing out on what is possibly their last financial lifeline, their credit cards. Even more worrying is that when the credit card bill becomes active after a few months, credit is going to be even more difficult to get.

Dann Adams of Equifax stated, “The last lifeline for many consumers is their credit card, and that lifeline is getting shorter”.

Still, there may be some respite from the continuing credit crisis. According to Equifax’s figures, while the delinquency continue to rise, the pace has slowed somewhat. Adams said that mortgage delinquencies may be on the verge of peaking.

“We’re hopeful we’ve seen the bottom and are setting the stage for a recovery”, Adams said. “You don’t see it in the numbers quite yet”, he added however.

Date May 14, 2009

Credit Card Debt’s Next Crisis: Student Debts

While the Senate is currently rolling out its Credit CARD (Credit Card Accountability, Responsibility and Disclosure) Act, an act designed to protect private credit cardholders from unfair and deceptive practices of the credit card industry, a new sector is beginning to buckle beneath the burden of excessive debts – students.

Credit Card Debt's Next Crisis: Student DebtsThe continuing crisis has touched all sectors of American economy. Credit companies, looking to gain some ground against losses to defaulted loans and other financial losses, are tightening the noose around student loans. Thus, students are finding it very difficult to finance their continuing education. Students have had to look elsewhere to find some cash to continue schooling, what with the student loans drying up. Their quickest solution – credit cards.

Credit experts are seeing a distressing trend that may lead to another credit industry crash. A former Trans Union credit educator and the current financial expert of Credit.com, Emily Peters recently said that; “We were expecting the findings to be pretty bleak. We’re seeing things dry up in student loan financing.”

The situation is very troubling. Students seem to be turning to their credit cards more and more, from textbooks to school tuition. The number of students relying on credit cards is also increasing, with about nine of ten students using plastic to pay for college.

Sallie Mae, a national financial management program and loans provider for students also released a statement this month saying that the average balance of students on their credit cards are at record levels now.

Students have also not been exempt from interest rate increases, which seem to be the trend of credit companies nowadays. Some have seen their interest rate increase from 9.9% to an astounding 25%. Banks are also decreasing their credit limits as well. Even students with good credit history are not exempt.

Another troubling result from the survey is that out of every five students surveyed, two say that they charge items while knowing that they would not be able to pay for them. Unfortunately, these are often high priority items.

“These are no longer frivolous expenditures, like going to Cabo for spring break. These are actual education costs,” Emily Peters said.

The dropping employment rate is also making the problem worse. Students cannot find any relief from their credit card debts by looking at the job markets. Owing to the massive layoffs that American companies have been doing, the job market is just about saturated with job seekers who have more qualifications and experience to offer than a student just coming out of college.

Date May 13, 2009

Small Businesses Getting Hit With Credit Card Rate Hikes

As the economic crisis continues and banks continue to search for ways to turn a profit, it seems that they are beginning to turn their eyes towards small businesses. This comes as the Senate prepares to pass the Credit CARD Act.

1105264_57104407Small business enterprises are just one of the many sectors of society that has been adversely affected by the economic crisis which is still affecting the nation today. Lending companies, themselves in dire financial straits, have had to cut lines of credit for businesses. Thus, small businesses no longer have a reliable credit line to fund their daily operations except for their credit cards. Credit card loans have virtually become the norm for small business financing and some businesses are having a hard time keeping up with the monthly bills.

The NSBA or National Small Business Association recently released their survey results, which give a clearer picture of how bad the situation is for small businesses in the country. Participants of the survey were 288 members of the NSBA. Of those who participated, 2/3 saw the interest on their business credit cards increase within a 12-month period. What’s more, 41% of the respondents also reported that their credit limits had been slashed by the credit card companies.

It seems that small businesses are the new victims of the credit card interest hikes that private credit cardholders faced and continue to face. Like private credit cardholders, small businesses are asking why they are taking the burden of higher interest rates when banks are getting incredibly low rate loans directly from the money of taxpayers. Some see it as banks getting back their money twice. Some observers say that banks are looking for every avenue to profit as they incur grave losses from defaults and delinquencies on their credit card lines. It just so happens that small businesses are the next in line.

Unfortunately for small businesses, while private credit cardholders have some small hope in the future in the form of the Credit CARD Act that may pass into law this very month, they do not have that luxury. The Credit CARD Act is the government’s answer to what many people see as unfair and deceptive practices in the credit industry. The Act, however, contains no provisions that offer protection to small businesses. It looks like small businesses are going to have to start petitioning their lawmakers to draft a similar legislation for them.