PaymentsJournal
SUBSCRIBE
  • Analysts Coverage
  • Truth In Data
  • Podcasts
  • Videos
  • Industry Opinions
  • News
  • Resources
No Result
View All Result
PaymentsJournal
  • Analysts Coverage
  • Truth In Data
  • Podcasts
  • Videos
  • Industry Opinions
  • News
  • Resources
No Result
View All Result
PaymentsJournal
No Result
View All Result

In Credit Cards, Be Careful What You Ask For, And More Careful When You Don’t

Brian Riley by Brian Riley
January 28, 2020
in Analysts Coverage, Credit
0
In Credit Cards, Be Careful What You Ask For, And More Careful When You Don’t
5
SHARES
0
VIEWS
Share on FacebookShare on TwitterShare on LinkedIn

It happens to me frequently, and probably to you also.  You have a perfectly good credit card with a $10,000 line, and after two good years of perfect payment history, the line gets increased.  I have four credit cards with lines greater than $30,000.

I will never, ever use that kind of credit.  First of all, interest rates are exorbitant.  I might sneak in a balance transfer if it is convenient to pay out an insurance bill, but intellectually, I could not live with a 20% interest rate on $30,000.  That amount about $496 a month in interest, plus another $833 per month to reduce the balance.  Way too rich for my blood.  I’d instead save and wait.

The Los Angeles Times carried a Bloomberg story about unsolicited credit line increases.

Subprime and near-prime customers got increases at a higher-than-average pace, according to the agency. That means many of the people getting boosts have blemished or limited histories of paying bills.

Says a cardholder: “It’s like putting a sandwich in front of me and I haven’t eaten all day. How can I not take a bite out of it?”

Whatever the case, the immediate result is clear: debt and lots of it. Outstanding card borrowing has surpassed its pre-crisis peak, reaching a record of $880 billion at the end of September, according to the latest data from the New York Fed’s consumer credit panel. That’s boosting profit at top lenders like Capital One, JPMorgan and Citigroup Inc. a decade after banks cut credit limits without warning during the crunch.

Now, here is my strategy. Don’t run up the card.  Don’t tell your spouse about the line increase.  Enjoy the fact that your FICO Score will benefit from the decreased line utilization.

In the soon-to-publish 2020 Mercator Advisory Credit Card Data book, you will see the new levels of contingent liability (Here is the 2019 report).  Right now, credit card issuers have contingent liability for $4 trillion.  That is almost four times the volume of outstanding debt in the U.S.

The funny thing about credit lines is that those who run them up should not get them; those that don’t use them don’t need them.

Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group

Tags: CreditCredit CardsDebtFICOinterest rates
5
SHARES
0
VIEWS
Share on FacebookShare on TwitterShare on LinkedIn

    Analyst Coverage, Payments Data, and News Delivered Daily

    Sign up for the PaymentsJournal Newsletter to get exclusive insight and data from Mercator Advisory Group analysts and industry professionals.

    Must Reads

    Everyone Benefits from the Real-Time Payment Networks  

    Everyone Benefits from the Real-Time Payment Networks  

    March 22, 2023
    commercial payments

    Optimizing Commercial Payments in the Digital Age

    March 21, 2023
    cross-border payments

    Cross-Border Payments: Fighting
    E-Commerce Fraud Using Data

    March 20, 2023
    fraud, ChatGPT-4

    How to Fight Fraud While Still Enabling a Great Online Customer Experience

    March 17, 2023
    RTP

    Financial Institutions Without an RTP Strategy Risk Being Left Behind

    March 16, 2023
    visa chargeback

    New Visa Chargeback Guidelines Will Be a Game Changer

    March 15, 2023
    liquidity management

    Liquidity Management Takes on Increasing Importance in Uncertain Economic Times

    March 14, 2023
    payments

    Key Challenges from Growing Payment Methods and Volume

    March 13, 2023

    Linkedin-in Twitter

    Advertise With Us | About Us | Terms of Use | Privacy Policy | Subscribe
    ©2023 PaymentsJournal.com

    • Analysts Coverage
    • Truth In Data
    • Podcasts
    • Videos
    Menu
    • Analysts Coverage
    • Truth In Data
    • Podcasts
    • Videos
    • Industry Opinions
    • Recent News
    • Resources
    Menu
    • Industry Opinions
    • Recent News
    • Resources
    • Analysts Coverage
    • Truth In Data
    • Podcasts
    • Industry Opinions
    • Faster Payments
    • News
    • Jobs
    • Events
    No Result
    View All Result

      Register to download the Ekata complimentary report: