CHESSNOID

This isn’t new information to those already affected by it, but as the economy continues with higher unemployment and ever increasing  foreclosures,  more consumers will become the new profiled customer to be cut off.   We have new laws that will slow down credit card companies from making changes as fast, so this has motivated the credit card companies to preempt the effects by choosing to accelerate credit limit cuts or to cancel the credit cards altogether.

Reuters:

According to a study by credit scoring company FICO, formerly known as Fair Isaac, 33 million Americans had their revolving credit reduced between October 2008 and April 2009. That is up 25 percent from the previous six months.

And there are more cuts to come. In a recent survey by the Federal Reserve, 60 percent of banks said they expected credit card lending standards to remain tight at least until 2011.

Total credit card lines, both used and unused, declined in June at the largest credit card issuers.

Total lines at American Express Co (AXP.N), Bank of America Corp (BAC.N), Capital One Financial Corp (COF.N), Citigroup Inc (C.N) and JPMorgan Chase & Co (JPM.N) declined by a combined $32.1 billion, or 1.2 percent, in the month, Orenbuch said.

American Express, the largest U.S. credit card company by sales, posted the biggest June decline, 2.6 percent, while Bank of America showed the largest cumulative decline since October 2008, 28.6 percent, Orenbuch added.

American Express recently canceled 2.7 million cards that had not been used for 24 months and had no outstanding balance, Chief Financial Officer Daniel Henry said last month.

David Nelms, chief executive of Discover Financial Services (DFS.N), said his company was reducing the number of new accounts created.

Valentin estimated credit card firms could close one of every five accounts of subprime borrowers, a segment of the market where Citigroup and Bank of America have the biggest exposure.

“You will see a lot less credit available,” he said.

The ironic thing  is that credit card companies will have less accounts to make potential money on. Credit card companies make money from the interest and annual fees consumers pay and from merchant fees from businesses that accept their cards. There will be more losses in the future and with a shrinking portfolio, the losses they will incur will be magnified.  I only hope the Obama administration does not continue to bail out these companies and commit fraud against the American people.