Credit Card Industry.

Brace yourself people, it is going to get really ugly. Not one of the credit card companies made a profit fourth quarter 2008. It's only just starting. You may be glad those "bad guys" didn't make money, but the reason they didn't make money is very, very frightening.

 

I wonder if they did not make money because of having to write off a lot of default accounts or if they did not make money because of people not using their cards as much.

If it is defaults then I could care less, we all knew that was coming. If people have stopped using them then that is a bad news for the economy but probably good news in the long run.

Credit cards are bad. Granted us idiots who run up a lot of debt on them are more to blame than the companies who enabled us but the whole mechanism is bad. Extending credit cards with limits of over a year's salary is irresponsible by the companies who do it and if they fail then the government should not bail them out for bad business practice.

 

Credit cards can be a bit different for alot of reasons - I don't think it will matter much compared to what's happened in housing / global deflation of equities.

I think 1 in 8 homes are underwater.

Credit cards are totally unsecured. Way less $$ than 1 in 8 homes being underwater. NOt to mention, the fucking things are so profitable with the 18% rates.

We'll see an upswing in defaults, but it won't compare to the mortgage issue.

 

It's mainly due to asset quality and correlated to home price depreciation as well as unemployment. People are going past due and then the the money is being charged off. Card use is actually increasing, which is not a good thing as most of the new charges are bad debt due to people using the cards to live. That is what is going to make things worse. Most of the bad cards are the ones issued in the last couple of years, similiar to the bad mortgages. CC companies have really clamped down on cards lately but it is probably to late.

 

The main issue with cards is historically they have been a pillar of strenght for banks when other things went bad. Fee income increased as people got behind. Not so anymore as debt is just being charged off. The card products will not be able to add revenue during this crises so that will definitely add to the banks troubles.

 

I think I'll go to Kohl's this weekend and get another card...you know for that one time discount

 

So the CC people are getting so many 'fail to pays,' they will just pass off the costs/losses in the form of higher late fees and APR. I wouldn't be surprised to see CC companies start charging for issuing cards. The banks used to pay you for keeping/using your money but now we're so dependent on banks for keeping it(instead of hiding it under the matress, etc.) that they assign many more conditions to our money. It's not such a stretch, and probably a good thing, for CC to start charging individuals for cards.

 

The CC companies can't charge higher fees to late payers now because those people are just defaulting instead of getting behind and then finally repaying. Those people used to be the bread and butter with regards to profits. They are doing all they can before that new law comes into being I think next year. Now, you are probably right that those of us that do pay will get higher fees, rates, etc. As usual, those that pay get screwed.

 

what new law?

 

DaveW:

http://credit.about.com/od/consumercreditlaws/a/creditbillright.htm