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These Companies Do Not Want Your Business

Posted by Larry Doyle on March 21, 2009 2:11 PM |

Many credit card companies are now offering incentives for a wide range of their customers to “take their business elsewhere” and return their cards in the process. Are these companies trying to turn business away? Have they expanded too rapidly? Are they having operational issues? Are they afraid of what the future holds?  In a word, the simple answer to all those questions is YES!!

Credit card companies are already experiencing a significant increase in delinquencies and defaults and expect both those figures to ratchet higher in the face of rising unemployment. 

For those even with stellar credit, do not be surprised to see your rates and charges increase. These credit card companies have retreated into a total bunker mentality. 

How Can We Make You Go Away, from the WSJ’s Smart Money, highlights the fact that consumers should be working aggressively at paying down debts in order to avoid increased rates or a lack of credit completely.

You thought being a loyal customer meant something. At desperate times, desperate companies will take desperate measures.    


  • Helene

    I have wondered for some time, considering the high percentage of mortgage holders who have made their mortgage payments on time, and the rediculous number of solicitations we received weekly offering us another credit card, which we never accepted, if the amount of bad debt on credit cards, by some percentage of the holders of multiple credit cards, wouldn’t at least rival the bad debt on home mortgages. In the cases of bad debt on credit cards there isn’t any collateral. In the cases of bad mortgages, at least the homes have some value Are there any statistics available on this?

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  • Larry Doyle


    There are certainly statistics for delinquencies and defaults on both credit cards and mortgages.

    From a historical perspective, credit card defaults typically run 1% higher than the unemployment rate. The unemployment rate is currently 8.1% and projected to go to at least 9% and perhaps 10%. Thus credit card defaults will likely end up in the 11-13% range. That rate of defaults is approximatley triple what it was a year or so ago.

    My best guess is that mortgage defaults are somewhere in the vicinity of 5-6% for mortgages originated in the last few years. These loans obviously have the greatest degree of risk as the homes have declined the most in value.

    No doubt that the entire mortgage finance and consumer credit finance businesses are changing dramatically.

  • fiscalliberal

    I would bet there is a lot of data regarding credit card defaults regarding unemployment by region. Since this is a highly automated data base. They could automatically get your credit score, probably get your income and profession along with your zip code. Certainly marital status, children’s ages could be added. For certain they have your payment history and home ownership profile.

    Simple automated queries of the data base for any condition would produce a print out that can be analyzed quickly. So as economic conditions change, I am certain evaluations of individuals could be made and changed. I think you are right that the future of the big banks who tend to deal in this stuff is a big factor. Certainly Citi is one of those that are suspect.

    However, in switching around our CD’s in banks we get to talk with the account managers of the banks and they say, a lot of people are over drawing their accounts and pay little attention to their balances. So – in this environment would probably side with the banks. The default ratio is probably climbing dramatically.

    More and more I support the idea of Merideth Whitney in that we need to empower the small banks and encourage them to expand. She was also talking about the benefits of some credit card companies such as American Express merging with mid size banks to improve the capital reserve ratios.

    When it is all said and done, from an individual perspective, what is wrong with maintining a larger bank balance and not need the credit card. A lot of people do that.

    The whole situaiton is not conducive to simple answers

    • Larry Doyle

      Fiscal…outstanding color. Certainly given the wealth of easily accessible personal information, every consumer’s life is now an open book.

      Actually your color makes me think that bank actions on this front are a good indicator on the economy. When banks stop aggressively turning away new and existing customers we can expect they think the economy is starting to improve.

      Thank you again for your insightful analysis.

  • sunup

    Larry, We have a card with Capital One for more than twelve years.We pay the balance monthly, and have never been late.

    We were just notified our rate is going to 17.9% on purchases,and 29.4% if payment is received three or more days late twice in any 12 month billing period. We have the choice of refusing these terms.

    If we decline they would then close the account and we would loose our miles earned, which are considerable. By the way we do have stellar credit.

  • Larry Doyle

    Sunup…These banks are borrowing money at basically 0%. The fact that they are jacking these rates indicates two things to me.

    1. They see the economy and chargeoffs getting worse.
    2. They are hard pressed to generate revenues.

    Do they care about their customers? Not really.

  • fiscalliberal

    Larry – the Federal Reserve has a very interesting U.S. map depicting Credit and Mortgage default rates by county.

    Map is at:

  • Larry Doyle

    Interesting site. Looks like the solid Midwestern virtues of thrift and fiscal discipline would be welcome along some of the border counties of the East, South, and West.

    You are a walking encyclopedia. Thanks!!

  • Donnie

    LD,The credit card are no different than the Fannie,s and Fredies in that credit is extended to those who cannot aford it.I here many stories about people recieving credit card offers when they are so far behind on bills already.I also believe that if sunup was just paying the minimum payment they would not raise the rate.These companys prey on the weak and punish those that try to do the right thing.

    • Larry Doyle

      Quite a business model, eh? Although, I do think that even if people merely make the minimum payment the rates at a lot of these card companies are going UP, UP, UP…

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