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The US braces for next crisis: Credit cards
03 November 2008

http://www.domain-b.com/finance/banks/20081103_credit_cards.html

The defaults that started with the sub-prime loans crisis in the US leading to a global $7.7-trillion loss in stock market value since October, are now showing signs of moving into the US credit card industry that will hit the balance sheets of the card issuing banks.

Reports indicate that a substantial portion of the 158 million US card holders using 1.5 billion cards have started defaulting and banks had to write of approx $21 billion in bad credit loans in the first six months of this year and expect a further loss of $55 billion in the next 12 months.
The mortgage crisis has been the focus of the US public, media and the government alike that no one noticed or too tired to view the oncoming of the next shockwave – credit cards, as the lethal combination of mortgage losses and now the surge in credit card defaults has the potential to bring the entire US economy to its knees.
While campaigning in Edinburg, Texas, US presidential candidate, Barack Obama had warned students at the University of Texas-Pan American, way back in February this year, ''Just be careful about those credit cards, all right? Don't eat out as much.''  After the foreclosure crisis, he had warned ''credit cards are next in line.''
As with nearly all US banks giving mortgage loans to people who could ill afford them, the same story is expected to unfold in the credit card industry where banks  have been aggressively peddling credit cards over the years to consumers who are least eligible to hold one, including students, as returns from cards is higher than other banking services.
One commentator remarked that access to easy credit with unrealistic balance limits and the underlying message that it's OK to spend what you don't have, is as unsound as any sub prime mortgage scam.
For years, consumers in the US have become ever more dependent on credit cards...