Posted on 10/16/2008 10:15:31 AM PDT by BGHater
Consumers are increasingly unable to pay off their credit cards, forcing banks to hoard cash to protect against future losses and lend to fewer people, according to reports yesterday from several of the nation's largest banks.
These financial disclosures showed a spike in credit card loans going bad, putting further pressure on already-stressed balance sheets. J.P. Morgan Chase said the number of credit card loans in default rose 45 percent in the third quarter from the comparable period a year ago and predicted that default rates would sharply accelerate through 2009, with 7 percent of credit card loans going bad.
"We have to be prepared that it gets a lot worse," J.P. Morgan chief executive Jamie Dimon said about the overall economic outlook.
Capital One, a credit card lender and bank based in McLean, announced rising default rates and delinquencies in its portfolio of credit cards and auto finance loans yesterday. The company said 6.34 percent of credit card loans went into default last month, up from 5.96 percent of loans in August. The company has said it expects default rates to rise to 7 percent next year.
The deterioration in consumer credit, the latest downturn to whack Americans after the housing slump and mortgage meltdown, threatens one of the linchpins of the U.S. economy. Over the past 10 years, credit card debt has gone up 75 percent as Americans' real wages and savings rate have stayed flat. That means Americans have been spending beyond their means -- and fueling economic growth with borrowed money.
(Excerpt) Read more at washingtonpost.com ...
Well,just quadruple the minimum payment required and all will be well.I mean,doubling the minimum payment in 2005 has worked so well,after all.
Capitol One recently raised its minimum monthly payments. Not surprising fewer people can’t make the payments.
Another bail out coming? Maybe I better go buy HDTVs for each room in my home.....
Those making minimum payments on their credit cards should not have been giving those cards to begin with. That's irresponsible foolishness.
These media stories are suspect. I know people who just got credit lines increased without even asking, and people who continue to get blank checks in the mail, inviting them to borrow thousands of dollars. Doesn’t jibe with the media noise.
Gee, could it be that the credit crunch applies mainly to those with poor repayment histories?
I wonder where all this misinformation is coming from. I received TWO totally unsolicited and undesired credit card offers just this week. Yes, yes, credit crunch and all that—NOT HARDLY!!!
A testament to W's economic policies.
maybe the credit card companies ought to stop their deceptive practices of tricking people into making late payments and bumping up interest rates to 30%
I hope we don’t get coerced by Czar Paulsen into bailing out the slime weasels
capital one changes the due date every month so they can nail you with a $29 late fee.
Ya gotta watch those tricksters - having a hard time feeling sorry for them.
Like this is a surprise to anyone, seriously. I dont know about you but where I live there are new houses going up everywhere, everyone driving new cars, there cant be that many people in the area making that much money, its impossible. My father taught me to save and pay cash, and yes I learned the hard way with a credit card, only about a grand, but still. I have no idea how anyone will be able to survie with 15-20-30-100K in credit debt, its amazing. Serves them right for living on credit, its ridiculous to live on credit....”the rich became the beggers, the fools became the wise”
Not long ago, I ran into problems and a little bank in Columbus, Georgia not only removed a late fee, but they lowered the interest rate. Guess who gets paid first every month now. (Hint: It isn't Chase or Bank of America)
Why are people not paying on their credit cards? It’s not like we have 25% inemployment.
I think the credit card people might be regretting the bill passed a few years ago that gave sweetheart deals to the credit card companies.
What really hurts the credit card companies is that the terms of the new bankruptcy laws will make it harder for defaulters to pay any money back. The old system allowed the credit card companies to recoup some of the losses....the new laws pretty much make defaulters pay it all (or most), or, pay nothing. When you have no money, you pay nothing.
Of course, Wealth-redistribution and job loss due to bad free trade deals....illegal aliens taking jobs away from Americans....and other bad economic policies are a contributing factor.
And this problem will grow....as the unemployment rate rises.
If the Credit Card people were smart...they would lower interest and the monthly payment requirements. They would recoup more money
Westerners need to learn to LIVE WITH LESS.
Sorry, but buying tons of Chinese made crap using your 18.9% credit cards will never fulfill your soul.
Simplify your damn life. No, it might not be good for the economy, but it’s good for the country overall.
I would imagine that lenders are focusing more on people with good credit. They have to stay in business some way.
Banks are obviously spiking offers to those who have a history of repayment, to make up for money they're losing from defaults.
They can't just sit on their haunches; they have to try to get the money they're losing from somewhere.
Banks hoard cash? Doesn’t make sense to me. Makes me wonder if this reporter knows what the hell he is talking about. If there are more bad loans in a banks portfolio, they are going to build their reserves to offset these losses, which will hit the bottom line on the income statement, but that has nothing to do with cash. A bank doesn’t hoard cash, it will either loan it out or invest it somewhere else. Cash laying around in the vault is not an income producing asset.
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