In this New York Times podcast, Eric Dash talks about the strategies credit card companies are now employing to limit their risk:
- increasing interest rates
- chasing the balance – whatever you pay your card balance down to becomes your new maximum credit limit
- raising fees (exasperated sigh, not much room here any more)
- increasing payment requirements by changing the requirements for what gets paid off first
- proactively closing accounts if you live in the wrong neighborhood, have the wrong profession, or shop at the same stores as those who do
The companies fret that regulators may crack down on some of these practices in a possible new era of bank scrutiny, so they’re rushing to implement the least palatable options before it’s too late.
Don’t get me wrong. Credit card companies do need to limit their risks to avoid imploding. If bankers shut off the credit card spigot for small businesses before the flow from other sources starts again, however, they may find they’ve triggered their own losses by starving their debtors of the liquidity they need to generate those bill-paying profits.