Monday, December 13, 2010
Risky Borrowers Find Credit Available Again, at a Price
While getting credit is still difficult for people, it's getting a little easier. However, it does come at a price. Instead of every person being "pre-approved" like a few years ago, the group of people getting credit cards is more carefully selected and the cards come with higher rates and annual fees. In addition to this, there are new categories of borrowers such as “strategic defaulters,” “first-time defaulters,” and “sloppy payers." Hopefully, even with these new restrictions, the greater spending ability will help the economy recover a little more.
Subscribe to:
Post Comments (Atom)
Banks have more money to lend. Consumers get more money to consume. Companies hire more people to satisfy the consumption. Hope this is what follows these credit card issuance.
ReplyDeleteThe real problem facing the economy is not with people defaulting on their credit card debts but with people defaulting on their mortgages and business defaulting on their loans. The only way to mitigate this is to have tighter restrictions, which does not mean higher interest rates, when giving out these loans. This would ultimately result in fewer "bad loans" and lower interest rates would spur more investments hence boost the national output. Once consumer confidence sets in, it would automatically result in higher spending hence higher employment as firms look for people to produce these goods and services.
ReplyDelete