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We’ve been telling you about the next big meltdown in the financial world—the credit card crisis. See our reporthere. Now the story is going mainstream and the news isn’t pretty. An article in today’s New York Times gives some startling numbers and dire predictions of things to come: | 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. |
All that easy credit with the over-the-top credit lines is biting back hard—for the lenders and for you.
Even if you’re a creditworthy consumer who’s never missed a payment, be prepared to see your lines of credit slashed. If you’ve got a spare Capital One credit card that you haven’t used much lately, never mind the warning, “Use it or lose it.” The company is already shutting you down.
Maybe it’s not such a bad thing to have one of your credit card accounts closed—it’s one less spending temptation. But the bad news is, even if you’ve done nothing wrong, it could result in a lower credit score, which means you’ll have to pay higher interest rates, and . . . good luck next time you try to take out a loan.
And now the Treasury Department is sounding the alarm by inviting consumers to check into the “Bad Credit Hotel.” Sounds ominous, but it’s actually our tax dollars at work in a new advertising campaign promoting an online game about how to maintain good credit.
Read more: As Economy Slows, Lenders Begin to Curb Credit Cards
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