Tuesday, November 11, 2008

Is credit card crisis next?

Credit card debt may be the next bubble to burst although the problem will not be as big as the sub-prime mortgage meltdown. The debt is also smaller than the adjustable rate mortgages that are due to reset in coming years.

However, a credit card crisis would impact companies that haven't been so directly impacted by the mortgage mess. As with mortgages, credit card debt has been packaged as sold to investors. It was a way for banks to reduce risk.

Despite interest rate cuts, credit card interest rates and penalties have skyrocketed recently. Part of this is to cover increasing credit card default rates and part to raise cash in a tight credit market. The average US household now owes $10,678 in credit card debt, up 29% from 2000.

Why banks are boosting credit card interest rates
USA Today - Nov 9, 2008
By Kathy Chu and Byron Acohido, USA TODAY Tommy Newsom was shocked when his bank nearly doubled his credit card interest rate this year, to 27%, ...
Credit cards versus loans NEWS.com.au
Credit card crunchtime Debt-ridden consumers rethink personal ... The Register-Guard
Wealth Check: 'I want to travel the world before I have too many ... Independent

Sky News
PM's Credit Card Concern
Sky News, UK - 2 hours ago
Gordon Brown says the Government is concerned about rising rates of interest on credit cards. Will Brown let slip his tax-cutting plans? ...
UPDATE: UK To Set Out Plans To Monitor Bank Lending To SMEs EasyBourse.com

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