Rising Credit Card Losses Are Next Challenge For Banks

New York Times:

It used to be easy to guess how many Americans would have problems paying their credit card bills. Banks just looked at unemployment: Fewer jobs meant more trouble ahead.

The unemployment rate has long mirrored banks' loss rates on card balances. But Eddie Ward, 32 and jobless, may be one more reason that rule of thumb no longer holds. For many lenders, losses are now outpacing layoffs.

Read the whole story: New York Times

Comments

[KoolAidDrinkersAnonymous]

First the credit card bubble will burst, then the commercial real estate bubblu will burst.

All on Obama's watch.

Drink the Koolaid and continue to blame Bush.

[Rule Of Law]

In the 60's when credit cards were first being introduced, only the wealthy had them. The working people saved or paid on lay away and were able to buy homes, cars, take vacations and live pretty darn well without debt. In fact, the attitude was that debt was bad and you were stupid to try and live beyond your means.

Today everyone has at least 1, most folks 2 or 3 cards, and everyone I know is in debt. And everyone of them is in real financial trouble compounded by the economic downturn--a dangerous marriage of events! The best legislation to control the credit card companies is a pair of scissors, and we all can reclaim our financial freedom in seconds.

[leshanne]

I could never understand why CC providers approve applications of those already in multiple CC debts, or up the credit limit beyond what is reasonable. The result : overuse of credit card and therefore inability to repay the debt beyond the minimum amount. CC providers aim to make money from the interests accrued, so by right they should also accept that bad debts may not be recoverable. It's the risk that they undertake when they set out their so-called business model.

[TeeLolly]

Personal liability for these losses should be imposed on card company executives responsible for the decisions to charge usurious interest rates, impose bogus fees for no legitimate reason, engage in unfair collection practices from which third-party debt collectors are prohibited, and to fritter away all their companies' ill-gotten gains on fancy buildings, furnishings, executive bonuses on top of outrageous salaries, and other excesses. The credit card "business" was and is a fraudulent criminal enterprise in which these executives knowingly and willingly participated to satisfy their personal greed.

[MissingAmerica]

They are raising rates and fees at a time when people can ill afford to pay the principle. This is a recipe for disaster. The credit card companies need to look at their failure to serve the customers rather than putting it all off on the inability of the customers to pay. In other words, it is not the customers' ruined credit that is causing the problem, it is the creditors forcing the customers to ruin that is the problem.

[kepary]

if you cant make payments dont worry BO says that help is on the way

[AuntWilma]

The credit card industry should never have been permitted to exist in the first place. I'm for shutting them down completely.

[fcsakes]

I hope they all go down in flames. They push and push and then when people are hurting the most they raise their rates and incorporate every kind of fee their dinky, devious minds can devise. I haven't used my one credit card for anything I couldn't pay off at the end of the month for several years.

It's past time these companies hurt.

[franklinturner]

Banks and credit card companies are like large insurance companies. They spend lavishly the money they rake in (see: obscene salaries and bonuses at the top, grand buildings and furnishings, private jets, risky investments, lobbying, etc.). Then they cry poor when things don't go their way. I would love to have seen them fail in droves, but their loyal servants would not allow that to happen.

Money spent on the bailout should have been used to create a fund for making whole again those adversely affected by risky investments and corruption, not awarded to those engaged in risky and corrupt business practices. The biggest joke was pundits parrotting the line about needing to "unfreeze the credit markets." (Paulson probably thought that one up.) Consumer credit markets are still frozen, but that's okay, because what most Americans need is help paying off their debt, not help getting deeper in debt.

[Meggie]

Mr. Ward of Arkansas is probably not paying the minimum amount due each month if he's only paying $15 or so - "doing whatever he can"
He is making a good faith effort, but I'll bet the bank is NOT. I'll bet the bank is adding on bogus fees and penalties every month and making Mr. Ward's condition even worse.
Before banks get to set some artificial amount of $ losses, they need to get rid of all the bogus charges and usurous interest rates they've arbitrarily added onto that number.
We will never see the real number of their losses, only the artifically high one they've created.

[SharpDressedMan]

Only Bush allowed credit card companies to charge unlimited penalties. This credit card pushing needs to stop. Make it illegal to advertise credit cards. They did it for tobacco. Do it for credit cards.

[LaHenche]

EXCELLENT NEWS!

[blueken]

So let me get this straight, first the credit card companies carpet bombed the country with offers of credit cards to anyone with a warm body. Then when things started to go south, they upped the rates on everyone, people with good credit included. The people who didn't understand math, went under and the fiscal conservatives paid thier balance and stopped useing thier cards. Keep in mind that the credit card companies get at least 2.9% at the point of purchase, and these genuises are going under. Wow! I'm no genuis, but I know when you make a product totaly one sided, the world walks away. The credit card system is it's own worst enemy. It's time to regulate the hell out of them.

[Aneesia]

It tells you how inept the banks are, they charge usurious rates, and with these rates they destroy families, trample on peoples standard of living (you're late on you payments) etc. etc. and say how they perform a necessary service for the country....and they still can't make any money.
The politicians in Washington have done nothing but jump into bed with these creeps and knowingly hurt the populace. Screw them both

[franklinturner]

Good ... they only have themselves to blame. Banks have become completely unethical. They took billions of taxpayer dollars and in return hiked credit card interest rates to usury levels. They gave cardholders two optons: Accept the rate increase or close you accounts. (That's gratitude for you.)

A few years ago, I was several days late paying, and my 11% rate jumped to 22%. The person I spoke with explained that if I made a lump-sum $300 payment and was not late again, my interest rate would go back to 11%. Months later, it went back to 22%. The person I spoke with this time told me that my debt-to-income ratio was high, and therefore my rate was adjusted." When I explained that we had a deal, I was basically told that it didn't matter. So don't keep your end of the bargain, and make it even harder for people who are in debt to get out of debt. Nice.

I have learned my lesson and am on track to be debt-free in a year. After that, I will have only one credit card, to use for things like renting a car or checking-in at the airport, and I will pay the balance off each month. The media really isn't focusing on people like me, who have had it with credit card companies, but I suspect we will be adding significantly to the problems banks are having, and I couldn't be happier about it.