Card companies have already responded to the financial crisis by cutting consumer credit lines. In an effort to assess consumer risk, American Express is and making on-going credit decisions based upon things where a consumer has their mortgage and what stores they shop at. With credit tightening, it would not be surprising for other companies to follow suit.
Sadly, the report does not contain good news in an already tough economy. With credit markets being tight, consumers that still have available credit lines may choose to use them. I see this as one more problem that the banks and consumers will have to confront in the future. Just like the home mortgages, banks knowingly issue credit card debt, which consumers use. Even with the Truth in Lending disclosures, I have concerns about the extent to which consumers understand all the workings of credit card special fees and mysterious increases in interest rates. As Steven Semeraro here blogged recently, the Credit Card Bill of Rights Act of 2008 is not likely to get further than passage in the House. While we're bailing out the banks now, there's been little discussion how the credit crisis and economic downturn will affect consumers and banks in terms of credit card default. We may be past some of the worst in terms of the panic in the financial markets and risk of widespread bank failures. Will the banks may next be asking the taxpayer to pay for heavy credit card write-offs that result from all of this mess? Let's hope not. I don't think my kids have another $100 billion to spare.
— JSM
