Banks Reducing Credit Card Limits
September 26, 2008
This is the Decline. Many Americans live off of their credit cards. Now banks are lowering credit limits (story here):
After a weekend getaway in New York City, Joseph Lanza logged onto his Bank of America Visa account and was shocked to see that his line of available credit had been reduced to $1,000 from $3,800.
Because of the recent charges from his trip, his balance was $970, dangerously close to his credit limit. "I had been trying to pay my debt down to improve my FICO score and also my debt-to-credit ratio," said Lanza, 26, who works at an investment firm in New Hampshire.
But despite making timely payments and keeping careful track of each charge, he said, "It feels like I'm running up against a bunch of walls."
Betty Riess, a spokeswoman for Bank of America, said she was unable to address the specifics of Lanza's account, but she did say the bank is "taking a more aggressive look at accounts to control risk, given the current environment."
I had been predicting this move for a while. This is what is going to kill us. Many Americans live off of their credit cards. It's how they pay not just for frivolous items like large televisions, but also how they buy their groceries and gas.
How will people pay their bills? What happens when people miss payments, and due to universal default rules, end up owing credit-card companies 29.99% interest?
This Christmas is not going to be very merry. With a bad retail season this Christmas (How will it be anything but bad?), what will happen to the stock market?
The idea that this "bail out" is anything such, is a total joke. There are huge problems that our visionary leaders in Washington haven't even noticed.