Unsecured debt should not be legal. It is the true cancer within our financial system and not one elected official has the strength to talk to the American people about how their immaturity and gluttony is crippling our childrens' future. It is the greatest problem our families face, yet very little attention has been focused on it for fear of estranging a constituency.
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Bah, Humbug!
A Christmas without credit cards? What lower limits mean this holiday shopping season.
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What About Us?
Wall Street's problems have captured the attention of Congress, the White House and the media. But on the country's Main Streets, worried workers, struggling small business owners and cash-strapped families are wondering if anyone is paying attention to them. A look at how Americans are coping with the economic crisis.
Published Oct 15, 2008
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Here's a scenario that will be more common this holiday season: You fill your arms with purchases and head to the register, where you've been told you'll receive a 20 percent discount by applying for and using the store's credit card. That will help, because you're already nearing your MasterCard limit. But a moment later, the teenage salesgirl says, "Sorry, you've been denied." You slink out, gifts left at the counter, angry and a little bit ashamed, too. Didn't the store encourage you to ask for the card?
That's just one of many ways that this is going to be a different kind of Christmas, as retailers' biggest season collides with newly tightened standards from credit-card companies. Banks and other card issuers have been ratcheting down consumer credit limits, raising interest rates, closing down accounts completely and getting tougher about whom they'll give their cards to in the first place. "Every issuer is looking at this," says John Ulzheimer, president of consumer education for credit.com. "It's one of the top two issues we are hearing about from consumers, and that is a significant change." Since few card issuers are willing to disclose their decisions, it's unclear exactly how many Americans will be affected this holiday season.
At the same time, retailers are trying to fight back by pushing their own cards and starting Christmas sales and displays early. Customers can be expected to use less credit and more cash, propelling them to local stores and away from online merchants. Analyst Dana Telsey, of the equity research and consulting firm the Telsey Advisory Group, expects an even slower holiday season than the anemic one that's been projected. The National Retail Federation had been predicting a 2.2 percent increase in sales this holiday season, the slowest growth in six years, and that was before October's credit meltdown. Sales of big-ticket items like flat-screen TVs could be particularly weak, because the usual "one year, no payments, no interest" offers that often accompany those sales won't be as plentiful.
Credit may be more easily available at retailers like Target and Nordstrom, which own and manage their own credit-card programs. Most retailers turn that process over to banks, which use their own credit standards to vet customers applying for the store cards. That's how consumers can end up caught at the register between a merchant pushing new plastic and the issuing bank behind the program saying no.
Card issuers are making the adjustments to reduce their risk, says Ken Clayton of the American Bankers Association. "We are taking a more aggressive look at customers' risk profiles and their performance with us," says Bank of America spokeswoman Betty Riess. "We are closing some inactive accounts and tightening credit. We may adjust customers' lines."
American Express has reduced credit limits on one of every 10 customer accounts and is evaluating everything from the job and real-estate markets in customers' communities to individual customers' credit scores, payment histories and spending patterns. AmEx has admitted that it looks askance at "certain merchants"—though it hasn't identified which ones—who it says show up in the charges of customers with a higher probability of default, according to Kim Forde, a company spokeswoman. Credit.com's Ulzheimer says he has heard a subprime credit-card issuer admit to cutting credit on customers who patronize bars and marriage counselors.
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