Banks are Hurt by Credit Cards
The New York Times has this story: “Rising Credit Card Losses Are Next Challenge for Banks“.
Eric Dash and Andrew Martin do a good job of explaining the extent of trouble banks are having and are going to have with credit cards. “Even the government’s grim projections may vastly understate the size of the credit card troubles in store for major U.S. banks.”
The Pop is Going to Hurt
“Credit Card Debt: This Popping Bubble is Really Going to Hurt“, an article in AlterNet’s Corporate Accountability and WorkPlace news, offers a fairly complete perspective of what we face in terms of the credit card bubble.
Most telling are the comments of readers. They range from “pay off your credit cards as soon as you can” to “what if we all default at once?” If nothing else, the comments offer a sample of what many are thinking about the credit card bubble.
A Return to Traditional Banking Business
Jamie Dimon, chief executive of JPMorgan Chase, was interviewed by the Financial Times about his take on 2009. In “JPMorgan chief says 2009 will be bleak“, Mr. Dimon says, “we expect consumer loans and credit cards to continue to get worse.”
Mr. Dimon suggests the bursting of the credit bubble will change the banking industry by forcing a return to the traditional banking business of advising and lending.
I wonder, though. Isn’t the advice and lending behavior of banks part of what got us into this? It sounds like more of the same.
The Plastic School of Hard Knocks
A new school year is about to begin in the school of hard knocks. College students will face a wall of credit card offers.
It doesn’t seem logical. Why would credit card companies want to account unemployed holders who are usually low on funds, and will have difficulty making their monthly payments?
Credit card companies do not make billions off people who pay their balance in full. Credit card companies make their billions from high interest rates and late payment fees. Most financially illiterate college students are perfect customers for credit card companies.
And credit card companies have help from an unlikely source. Colleges and universities are in cahoots with the credit card companies! Many alumni associations and schools make money by referring students to apply for credit cards and, now, even debit/student ID cards! The primary education many of these students who fall for these offers being pushed by schools will receive may come from the school of hard knocks.
Read about this in “Parents face a perfect storm: college kids and plastic” .
Welcome to the Credit Card Bubble Blog!
If you’ve watched the television news lately, you’ve heard about the housing bubble. You’ve probably also heard about the general debt bubble. One thing that you may not have heard mentioned frequently is the credit card bubble.
You may have heard it in passing. The comments were similar to, “home owners are maxing their credit cards to pay for basic necessities like food and clothing.” Or maybe you’ve heard the astounding statistics about the number of credit cards the typical person has and the average credit card debt they carry on their cards.
While it hasn’t received as much attention (yet) as the housing bubble and the current credit crunch, you’ll hear more and more about the credit card bubble in the coming years. And it won’t be good news.
Now that lenders are tightening requirements for home owners who wish to get home equity lines of credit (HELOC) or home equity loans, more people will be turning to credit cards for cash.
It won’t be pretty for many.
The Credit Card Bubble Blog at http://www.creditcardbubble.com is a place to consider the impact of the credit card bubble on individuals and the economy. So jump in! Share your thoughts, ideas, tips and forecasts. It’s likely to be down hill from here for a while ..
