Why is consumer credit down a whopping $21.6 billion?

Why should rates come down? Why is it a bad thing to not have credit card debts?

We're about 6 months away from having no credit card debt. We've been paying on it for the past 2 years and working it down. That's a good thing for us and will let us make more purchases of things later.

A low rate won't entice me as I want out of it. A low rate is not smart especially when it goes up later on.

Spending beyond your means is not smart and got us in most of this mess to begin with. And guess what? We got smart and are getting out of it.

Cut my limit from $25k - that's fine. Up my rate. I'll cancel and move the balance for 6 months until it's paid off.

Credit companies are private businesses and have the choice to set rates where they want. Consumers have the choice to use them or not. The artificial manipulation of credit markets is how we ended up in this place, and the reason those rates are up is that bankruptcies are skyrocketing.

Which also is the reason that consumer credit is down by over $20billion. Its not just the fact that people can't access credit, they're also stripping the debt in bankruptcy court. According to Reuters last week, bankruptcies are up almost 25% year over year, and thats an ongoing rise since 2007. We're seeing 125,000 bankruptcies every month this year. You can't present a micro of that market and demand lower rates, that's like saying people who bathe also get skin cancer. It's bad science, bed economics.

Our policy makers have been kicking this can down the road for two years, but ultimately the crash MUST happen. The shell game Wall Street and Washington are playing is only going to make the REAL recession longer and more painful. Those who are smart right now are getting prepared, not applying for new Visas, and they're putting their money into things of sustainable value. (Actually they're desperately searching for such things; note the erratic behavior of gold and oil in the market)

The point is you shouldn't give credit to people who do not know how to use it. However, you shouldn't punish responsible people by raising their rates or cutting their limits. There is nothing wrong with credit as long as it is used responsibly.

If I am in good standing and paying my debt I shouldn't be forced to pay back more debt than I agreed to because of an arbitrary rate hike. My contact in terms of my accepted credit were that I would be able to access a set amount and repay based on an interest rate set in the contract. Before utilizing credit I would know the terms of repayment.

The problem arrived when the rules of repayment were changed arbitrarily for many customers. This is what caused all the problems. Much of the credit collapse could have been prevented if the lenders were forced to abide by the rates set in the initial contract. No lender should have been allowed to change the rules of repayment during the repayment process. Yes this was written in the contract but it should have been against the law from day one to have that language in there.

Many fixed income people who were repaying debts all of a sudden could no longer repay them when the minimum balance due doubled or tripled. Or when their fixed rate of 9% all of a sudden switched to a variable rate that went as high as 29% without ever missing a payment.

The banks shot themselves in the foot because they got greedy. A 9% APR with a responsible contract for repayment still meant massive profits for loaning the money. In order to maximize profit to satisfy the stock market they raised rates on everyone to the point where most of the consumers of credit could never repay the debt obligation. In the end the banks lose and everybody loses.

If banks would have just stick to the original contract terms and not lent to irresponsible people perhaps the credit bubble and the collapse could have been averted.

I have no problem with companies being able to set their own rates. I do have a problem with taking advantage of customers. Many folks had the debt to begin with, and had their rates raised later. The stated solution is to transfer the funds. That solution is missing the point. Companies are not creating new credit. Therefore these folks are stuck paying high interest rates. Now I might argue that they deserve it since they accumulated the debt, however giving the circumstances that the credit card companies are are making money hand over fist, because of their ability to have access to money at low rates, as shown through their profits and large bonuses being awarded, I have to say that they are ripping the consumers to shreds and that is WRONG!

Here is another important point, if the consumers in general are a risk, why did they create such large credit limits in the first place? I will answer that, because for a long time they benefited from it! Believe me they do NOTHING in the consumers interest! Yes it is a business, but some might argue so is loan-sharking!

I am with Iridium on this subject.

Most was said in that comment, but I do believe that the reason for hiking rates, even to those responsible, was simply to make up for loss. You have to keep in mind that the insurance companies used to do this on a wholesale basis, called spreading the risk in which all get to pay for those living in high risk areas.
And yes, they shot themselves in the foot (again). I used to think that bankers were smart conservative people that deserved respect. Today, I think that they are as a group, greedy morons who fed on dumb consumers.

This is one of the few times that I return to the same forum, but after thinking it over, I had no choice.

While I really doubt that too many people read these posts, for those that do, I offer this thought.

What is said in the blog and comments are basically true, but none address the disparity that exists in reality. There is little justification for credit card rates that are in the teens and higher when the Libor rates, discount rates and prime rate are all SO much lower. True, Congress did not put a cap on rates as they did not have to. Congress saw fit to delegate what is considered "predatory lending" to the Federal Reserve was back in the 1990's. With that said, just what is predatory lending? I assume that means shylocks and loan sharks. The dictionary defines both as those that charge abnormally high rates. I, like the rest of my fellow citizens, have a great deal of difficultly differentiating the 10+% percent difference between what the credit card companies charge their customers and what they actually borrow money at. It looks like like greed to me and greed was what started this mess. There is also a certain irony here as some of these companies have received taxpayer support to survive and are now loaning back the peoples money to those that paid it in - albeit, now we have to pay dearly - twice.

With above said - I propose this:

An open letter to Mr. Ben Bernanke, Chairman, Federal Reserve.

Dear Mr. Bernanke:

On behalf of myself, and the citizens of the U.S. we call upon you to review credit card rates. You are commonly known as the 2nd most powerful man in the world and have been empowered, under GOD, and by the authority vested in you by our elected representatives of Congress, to seek out and prosecute, with the aid of the Attorney General, those that engage in predatory lending.
The banking community through their credit card issuing arms are doing just this, and this, is counter to all actions taking by the Federal Reserve to stabilize our economy. In fact, their actions do nothing more than to undermine your efforts. Our economy is consumer based.
Is an economic rape of the consumer in our best interest?
While we should save more and be more responsible financially, the same should be applied to those that issue credit. The rates should be fair as this is a capitalistic society, but how can one justify more than 7-8% given margins of borrowing and financing? Every company needs to make a profit, but exorbitant and excessive at this time serves no purpose but to line the pockets of the executives in charge. It does not serve this country and it's citizenry, nor will it help to speed recovery from this recession.
It is time to act for you only have to speak against this practice to put it to end. None would risk a court case for none would be willing to put their fate, before a "jury of their peers".


If there is a public out there - it's time - time for the mice to roar and sheep to BAA. If it is loud enough, the din will be heard - even through the solid stone walls of the Fed.

Yea, the credit card companies got ya by the short hairs, but it's only because you let them. I think you have a choice, if you don't like their rules then don't use them. Raising the rates at the drop of a dime is scummy and more then 45 days notice should be required for people who keep a running balance on their cards but bottom line no one twists your arm to take them. I have just about finally paid mine off. Although I don't like the rates and my current credit problems, I blame no one but myself. Credit is something that is too easy to abuse.