October 29, 2008 , IR Summary/NYT -Several crises have erupted recently and the latest is of the  credit card crisis. The banks and other credit card lenders look to be uncomfortable now, they can’t afford to retain the original promised made to the credit card holders.

The lenders of the Credit Cards are discouraging the numbers of those credit card users, particularly who are in debut. Those consumers who hold high credit limit and are good pay masters may not now use higher credit limit, it is being revised and the consumers shall not be able to enjoy their present permissible limit. 

After years of flooding Americans with credit card offers and sky-high credit lines, lenders are sharply curtailing both, just as an eroding economy squeezes consumers.

The pullback is affecting even creditworthy consumers and threatens an already beleaguered banking industry with another wave of heavy losses after an era in which it reaped near record gains from the business of easy credit that it helped create.

Lenders wrote off an estimated $21 billion in bad credit card loans in the first half of 2008 as more borrowers defaulted on their payments. With companies laying off tens of thousands of workers, the industry stands to lose at least another $55 billion over the next year and a half, analysts say. Currently, the total losses amount to 5.5 percent of credit card debt outstanding, and could surpass the 7.9 percent level reached after the technology bubble burst in 2001.

“If unemployment continues to increase, credit card net charge-offs could exceed historical norms,” Gary L. Crittenden, Citigroup’s chief financial officer, said.
Faced with sobering conditions, companies that issue MasterCard, Visa and other cards are rushing to stanch the bleeding, even as options once easily tapped by borrowers to pay off credit card obligations, like home equity lines or the ability to transfer balances to a new card, dry up.

Big lenders — like American Express, Bank of America, Citigroup and even the retailer Target — have begun tightening standards for applicants and are culling their portfolios of the riskiest customers. Capital One, another big issuer, for example, has aggressively shut down inactive accounts and reduced customer credit lines by 4.5 percent in the second quarter from the previous period, according to regulatory filings.  

In fact, the depth of the financial crisis has shocked a credit-hooked nation into rethinking its habits. Many families once content to buy now and pay later are eager to trim their reliance on credit cards. The Treasury Department, which is spending billions of dollars in taxpayer money to clean up an economic mess brought on in part by all sorts of easy credit, recently started an advertising campaign inviting consumers to check into the “Bad Credit Hotel,” an online game that teaches the basics of maintaining good credit.Full