Yeah.. the credit crisis is going to be nasty for creditors.
They're profit oriented companies and have aggressively pushed their easy credit on the public.

As we can see with the fall of big american banks, they're starting to pay for their easy credit sins.

Something that scared me yesterday was my son asking me for a car loan. He thinks that credit is available to everybody and that it's his right to get it. BTW... he's 17 and still in high school.

It was his attitude about credit that really scared me. No caution whatsoever. It's probably a teenage thing, however, it's not in the culture to say no to credit requests.

OPTION ARMs:

For those who are not up on this term (as I wasn't until this evening), I've copied a quick blurb from the Business Week article below. In a nutshell, using such a Mortgage Vehicle allows a person to make smaller payments up front, then as the years go on, the payments rise. Trouble is, people are having problems dealing with the rising payments. Now that the credit crisis has hit, people are going to find it much harder to re-finance out of these mortgages, as chances are the mortgage value has risen - especially if a person has only been making the minimum payments.

"With an option ARM, you have the option to make a minimum payment that doesn't even cover all the interest you owe, let alone any of the principal. The unpaid interest gets added to the balance on the loan."

http://www.businessweek.com/the_thread/hotproperty/archives/2005/08/why_option_arms.html

So where this is leading... My gut feeling is that people will opt to keep a roof over their heads before concerning themselves with the Visa's and Amex's of the world. I know shelter would be my choise if I had to choose which debt to pay.

If / When these types of Mortgages peek, I can envision the Banks and CC companies taking another hit.

O.C.

Yep, keep people in debt is the way to go. I am glad, i am out of that vicious circle.

yes that is right. But if they do raise charges then more people on the fine line of too much debt would be in trouble and then the circle would just keep rolling.I guess its just a case of too much debt everywhere is coming back to haunt everyone.

In a perfect world it would be nice not to pass the losses on to the consumer. Unfortunately, we do not live in a perfect world.

I wonder if the credit card companies will pass on the losses to their customers in higher interest charges and more user fees.That is the usual answer from most companies.

I agree with everything you say in your article Ottawa Chap. I have been saying for months, that the credit card industry is going to suffer in 2009. The credit card crunch will not take in affect till the second or third quarter at the very most in 2009. I have settled 12 of my credit card debts for 10 cents on the dollar in 2007 and 2008. I have three more to settle and they will give in when the credit crunch takes affect.

Received this in my inbox and thought it was an interesting read:

Playing the Credit Card Crisis to 70% 1-Day Gains

By Ian Cooper | Tuesday, November 18th, 2008

The housing debacle... The credit fiasco... The auto industry meltdown... And now the Credit Card Crisis?

Yep, just when you thought things couldn't get any worse, credit card companies are ready to take the plunge, too, as unemployment rises, and the housing and banking fiascos intensify.

But things aren't all that bad... there's always a way to profit, even in this market.

Consumers are building up massive amounts of debt. And many of them can't afford to pay it back.

It's far more difficult for consumers to dig their way out of debt now that other relied-upon options, such as home equity lines of credit, are no longer readily available.

It's so bad that revolving debt just hit a record $970 billion in September, with the average household owing more than $10,678 in credit card debt. That's up 29% from 2000.

Why do you think Discover Financial Services (DFS:NYSE) stock plunged from a $35 IPO price to $7.52? It's a card lender, and concerns itself directly with cardholder debt just like American Express.

Why Credit Cards are Next to fall...

Credit card debt is just beginning to resemble the mortgage debt problems at the core of our financial meltdown. And the last thing the financial sector needs to feel is further squeeze, as Americans have accumulated some $970 billion in revolving consumer debt since the end of September 2008, up 3.4% from the close of 2007.

Sure, the credit card industry is typically resilient during our economic slowdown, thanks to pricing flexibility. And the thinking was, that as the economy sours, and consumers become late on payments, credit companies can boost earnings through late fees and higher interest rates.

But that's no longer the case.

That's because consumers are tapped dry. Defaults are growing. Charge-offs have been pushed well beyond expectations. And losses are far outpacing what companies were hoping to account for with extra card fees and higher interest rates.

Oh, and if you think this spillover-effect from subprime has been bad... just wait until 2009 when Option ARMs begin resetting.