When Good Credit Goes Bad

from Minyanville:



When Good Credit Goes Bad
Andrew Jeffery Mar 03, 2009 12:45 pm


An impeccable credit score was once a source of pride for bill-paying, fiscally responsible Americans. Now, as card issuers slash lines, up minimum payment requirements and raise interest rates seemingly at random, a stellar credit rating is rare indeed.

Besieged by mounting losses on all types of consumer debt, banks and credit-card companies are scaling back: According to Bloomberg, 45% of all US banks reduced credit card limits for new or existing customers in 2008's fourth quarter.

Issuers are attacking the problem in various ways, but the net effect is the same: Americans are using less plastic. Citibank (C) is lowering credit limits, Capital One (COF) is charging new customers higher rates, JPMorgan Chase (JPM) is upping minimum monthly payments from 2% to 5% on certain accounts, and American Express (AXP) is awarding $300 to select clients if they close their accounts entirely.

The trouble isn’t just that formerly credit-dependent consumers are having a tougher time making ends meet. FICO scores -- the most common measure of a person’s credit-worthiness -- heavily weigh total credit utilized compared to total credit available.

....(snip)....

An anti-spending, anti-consumerist mindset is taking hold across the socioeconomic spectrum. This shift cannot be stopped by flowery talk from Washington - or by vilifying Wall Street in Congress. Spending, the hobby of choice for nearly 3 decades, is becoming the thing not to do. Saving, which had begun to seem positively un-American, is once again in vogue.

This isn't some transitory fad we'll soon forget when the good times roll once again. The current crisis will be felt in the American psyche for decades to come. .........(more)

The complete piece is at: http://www.minyanville.com/articles/AXP-C-jpm-Credit-cof-cards/index/a/21424