Consumers May See 45% Cut in Available Credit

Lower credit-card limits are coming just as job losses soar

By Jim O'Neill, Newser User

Posted Dec 1, 2008 6:00 AM CST

(Newser) – Americans already struggling with tight credit are in for another blow: banks may cut available credit card lines up to 45% over the next 18 months, reducing available credit by some $2 trillion, reports Reuters. Home equity and credit card limits already are lower than in the second quarter, an Oppenheimer and Co. analyst says, calling it a “dangerous and unprecedented” trend in an economy that’s seeing large jobs losses.

The five biggest players in mortgages and credit cards are all pulling back liquidity, she says, making reductions in consumer liquidity unavoidable.

[Images (3)]

[Quotes (2)]

Signs for American Express, Master Card and Visa credit cards are shown on a New York store's door. Banks are tightening up further on credit cards. (AP Photo/Mark Lennihan, File)

VISA credit cards are shown in Palo Alto, Calif. (AP Photo/Paul Sakuma, file)

Credit card advertisements posted at a bowling alley in Palo Alto, Calif. (AP Photo/Paul Sakuma)

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Pulling credit when job losses are increasing by over 50 percent year-over-year in most key states is a dangerous and unprecedented combination, in our view. - Oppenheimer & Co. analyst
Meredith Whitney

In a country that offers hundreds of cereal and soda pop choices, the banking industry has become one that offers very few choices. - Oppenheimer & Co analyst
Meredith Whitney

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Guest

Nov 30, 2008 9:27 PM CST

It wouldn't be a "dangerous and unprecedented" trend if any of those people who are going to lose their jobs had saved up during the last four years. But then, it's hard to blame them, when inflation has been sitting around 8% until very recently and wages have been stagnant. We have the Fed to thank for that. When will people realize that this is the Fed's fault and revolt?

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Consumers May See 45% Cut in Available Credit