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Banks and other lenders nationwide, seeking to reduce their debt exposure, are shutting off and limiting consumer credit card lines, even for many customers who carry low balances and pay on time.
As much as $2 trillion in consumer credit - nearly half of what is available - could be rescinded, according to an estimate by a prominent banking analyst.
Most bankers won't offer details about the cutbacks, but acknowledge they are happening. Betty Reiss, a spokeswoman for Bank of America Corp., the nation's second-largest card issuer, said, "We're taking a more aggressive look at accounts in order to control risk in the current environment." The bank is one of the biggest recipients of federal bailout funds - $45 billion.
Meredith Whitney, the Oppenheimer & Co. banking analyst who in November predicted a $2 trillion drop in credit availability, has said the loss will hurt the economy because consumers rely on credit cards for regular spending.
Tom McNiff, a retiree in Winthrop, said he received a letter Jan. 7 informing him the credit line on his Eastern Bank card was being reduced from $12,000 to $2,700 "to reflect your spending." The letter was sent on behalf of Barclay Card US, the company that owns his account.
Kevin Sullivan, a Barclay spokesman, said, "We think we have a [credit] policy that's appropriate for this economic environment."
McNiff said he rarely carries a card balance, unless he makes a large purchase, and even then he typically pays the balance within two months. He said the letter troubled him because he had a hunch it would hurt his credit rating. After McNiff called to complain and the Globe made inquiries about his situation, the company reinstated his $12,000 credit line.
Leslie McFadden, a writer for Bankrate.com, a consumer banking and finance website, said banks are targeting people with inactive accounts as well as those with large balances. "You can't prevent your credit card issuer from lowering your limit," she said. "The advice is to pay on time and keep your balances low."
if I remember correctly was suppose to be actually "For the People" - for getting loans and jobs being created, to keep credit flowing........
somebody, please tell me what I am missing out of all this, and what I don't understand.......
Originally posted by pikypiky
Yeah, if I were banks and other lenders, I too would stop (ahem) lending, especially when the debtors defraud or fail to pay back the loans. That's just common sense. Why would banks and other lenders dig themselves into a deeper hole with people who are already in a big hole themselves due lack of work, which means less taxes paid to the government and less spending other than on essentials, like food, clothing and mortgages?
Originally posted by FiatLux
Yep, it happen to me. I used my card yesterday, and they stopped it. I was lucky and had some cash on me to pay for it. This is BS. As one poster said, they get billions from the Fed that we will have to pay for, yet, they cut us off when it comes to credit. Yes, that makes me want to go get a loan to by things...........riiiiiight. I say to hell with them all. They can throw me in jail, i`m done paying taxes for all those crooks in Washington and the banks.