The next meltdown: credit card defaults may top $100 billion

[Ah Xoc Kin]

October 14 2008
Dire times are coming for consumers who hold credit cards and the banks that issue them, according to a report released Tuesday.

The report by the research firm Innovest Strategic Value Advisors, titled "Credit Cards at the Tipping Point," predicts that fallout from the credit crunch will lead to a sharp increase in credit card defaults in the coming year, making $1 out of every $10 owed on credit cards impossible to collect. That will force banks to write off nearly $100 billion in credit card debt, it said.

"A long build-up in consumer indebtedness, deteriorating economic conditions and a potential 'sudden stop' in credit availability could cause charge-offs to rise dramatically into 2009," the report says.

Misleading practices by credit card issuers will come back to bite them, say report author Gregory Larkin and Laura Nishikawa, as uninformed consumers who wind up facing surprise interest rate hikes and fees will be more likely to default on their loans.

The report concludes that Capital One is most at risk, due in part to its aggressive marketing and "fee-trapping" strategies.

http://redtape.msnbc.com/2008/10/credit-cards-at.html

http://www.businessweek.com/magazine/content/08_42/b4104024799703.htm?campaign_id=rss_daily

[Trajan]

1. I dumped out of plastic long ago ....

IF I dont have money for it: Then I dont get it

[ConcernedCanuk]

3. Me too, cut up my credit cards(with allowable limits up to $15,000 collectively) in 1981

.
.
.

smartest thing I ever did.

[Uben]

2. O...M....G!

We can't have a company suffer for making bad decisions, can we?


/sarcasm

[underdoggie]

4. CORPORATE WELFARE

CORPORATE WELFARE, FOR LACK OF A BETTER TERM, IS GOOD

WELFARE QUEENS, FOR LACK OF A BETTER TERM, IS BAD

[pam4water]

5. When are they going to wise up and limit the fees and rates on cards.

[CoffeeCat]

6. This is what will kill our economy...

...and it will happen so fast and so hard.

People will default on their credit card payments--just as people have defaulted on their mortgages. Times
are so tough, and the credit-card companies have acted like the mafia--enticing people into getting into
an unsustainable debt cycle.

When people default on this "100 billion in credit card debt"...there goes the credit card companies. Down
the tubes. However, then the other credit-card companies will take drastic measure to protect themselves, in
the same way that the banks and mortgage companies are protecting themselves by tightening the requirements
on loans. Credit-card companies will start calling in balances. They'll cut people off from existing credit
lines--leaving people destitute and worse than broke. All of a sudden, it will be "You can't use your card
and you owe us the entire balance in 30 days."

Pretty soon, credit-card spending will dry up. What happens to the economy then? Total unimaginable decimation.

It's hard to wrap my brain around the widespread devastation.

I wonder when this will start toppling....any guesses?

[Eurobabe]

7. Watch the video, quote credit card companies changed

the rules to suit themselves"

Seems to me they're about to get a big flippin' karmic payback.

[Ah Xoc Kin]

8. disturbing graph

http://ucclaw.blogspot.com/2008/10/first-mortgage-defaults-second-credit.html

[pscot]

9. Chump change

by Wall Street standards.