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The days of easy credit card offers and extravagant credit lines may be over for most Americans as lenders now seek to tighten both credit card eligibility as well as credit limits.
The pullback is expected to hit even credit-worthy consumers who are already reeling from the impact of an eroding economy. However a credit card crisis will come as the worst news for the beleaguered banking industry and pound it with another wave of losses after being at the receiving end of the recent mortgage crisis.
According to an estimate, Credit card lenders wrote off nearly $21 billion in bad credit card loans in the first half of 2008 as an increasingly higher number of borrowers defaulted on their payment. As the rate of unemployment rises and tens of thousands of workers are laid off, analysts estimate that the credit card industry will incur losses of up to $55 billion in the next year and a half.
The looming credit card crisis has compelled major lenders like American Express, Bank of America and Citigroup to enforce stricter standards for applicants and has led many to discard the riskiest customers from their portfolios. Customers appear to be the worst-hit as they lose once-easily available options like home equity and transfer balance to meet their credit card obligations.
