Financial crisis affecting US credit cards industry

As the financial crisis worsens, the US credit cards industry have also been affected. The number of default payments are on the rise and the credit card issuers are taking measures to tighten their business.

According to report from The New York Times, because the number of default payments are on the rise, credit issuers in the first half of the year have been forced to write off about 21 billion US dollars of bad debts. The report quotes analyst estimation that in the coming one and half years, the US credit cards industry on the whole can see about a loss of about 55 billion US dollars.

In the report, currently US credit cards industry default payment losses are at about 5.5% of the total unpaid debts. The prediction is that this ratio will increase and cross over the 7.9% mark made after the 2001 internet bubble burst.

The report also points out that the reason for the increase in number of credit card payment defaults is because of the worsening of the financial crisis and its effect on the real economy. The US unemployment rate is also on the rise which adds more financial pressure on credit card holders.

To prevent further losses, the US credit cards industry have taken measures to tighten their business which includes increasing credit card applicants qualifying standards and decrease of credit cards issuance.