The ‘coming’ credit card crunch would be a good thing

January 7, 2008 at 10:55 am 1 comment

After reading the latest article on about the looming crunch in the credit card industry, I am more convinced that it wouldn’t be such a bad thing. In all honesty, I welcome it.

I think American consumers need a wake up call when it comes to borrowing. It started with the subprime market, and will probably bleed into the credit card market soon. Soon these folks who can’t seem to live within their means will be forced to reap the benefits of their behavior. And, deservedly so.

I am full aware that the lending industry is out for one thing, and that is profit. But, it’s the consumers’ responsibility to educate themselves on what’s best. Quite frankly, they took the bait because it’s what they wanted. And in my world, it takes two to tango.

According to the article, since consumers have been unable to borrow on their homes, they’ve turned to plastic. In fact, credit card debt rose 4.47% in the final quarter of 2007, up from 4.24% from the previous year. Delinquency rates are also increasing, reaching 4% as compared to 3.84% in 2006.

“Should delinquencies continue to mount, it could impact a wide swathe of credit-card holders — even those who don’t have trouble paying their mortgages or managing their finances…The more consumers default on credit cards, the more these investors have to lose and, much like the situation with mortgage-backed securities, they may start shying away from these investments. As a result, banks will be less willing to extend credit to consumers.” I fail to see how this is a bad thing. Maybe forcing consumers to live on what they make would be a good thing. Maybe I’m wrong, but I highly doubt it.

Source: The Coming Credit-Card Crunch

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Entry filed under: Credit Cards, Debt, Real Estate and Mortgages.

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1 Comment Add your own

  • 1. TheRoyston  |  January 8, 2008 at 2:16 pm

    “Maybe forcing consumers to live on what they make would be a good thing”

    couldn’t agree more – didn’t anyone’s parents tell them “don’t buy what you can’t afford” – and if you’re pulling out your credit card, you can’t afford it.


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