As unemployment rises and economy worsen many Americans are having trouble to pay their credit balances, which creates further losses to credit card issuers. That has pushed credit issuers to tight credit guidelines, thus making it more difficult to get approved for a credit card.



Credit card delinquencies can rise 7% in first year of 2009. Many homeowners no longer have equity in their homes and therefore they rely on credit cards to pay their living expenses.

There is approximately $1 trillion in credit card debt compared to $14 trillion in mortgage debt. The number is still small compared to mortgages but it is piling up slowly as many Americans will use their credit limits and ultimately walk off from credit repayment.

With slowing economy and retailers reporting 1.2% decline in sales there is a better chance consumers will no longer spend as much as they used to. Consumers will be keeping their cash and savings tight this holiday season.

Credit card companies should not see the same problems as mortgage market currently has, as credit companies have time to prepare and learn from current crises. Tighten credit will help issuers but it will leave most consumers out as they cannot qualify for credit cards. This also should en courage consumers to have healthy debt, not to use credit cards as cash machine.

Even though many consumers will be using credit cards this season, the question will come later on when consumers will be able to stay current on their credit bills.

People are spending far more than they earn which needs to change. With tighter credit banks are on the right track to fix this problem, however; it may take time. If banks have doubts about you repaying balances, you may no longer qualify for a low interest credit cards.

Unemployment which currently stands at 6.1 percent could hit 7.5 percent or higher by next year, which would add to credit card delinquencies as consumers will be using credit cards to pay for everyday use. Analysts predict that economy will shrink this year and early next year, expending on classis definition of recession.

Credit card write-offs last year totaled $26.6 billion, and are on track to reach more than $41.4 billion this year.

This difficult credit card crisis comes at the most painful time for banks as they have relied on steady credit card operations. Subprime borrowers, those with less than good credit, might not be able to transfer their balance to low introductory credit cards as they no longer can qualify, thus defaulting on their payments.

This will be a harsh lesson for irresponsible companies, and a harsh lesson for people who turned to credit cards to pay their monthly bills. We live in a world that is run on credit. It is the next logical step in the progression of the market fall out. Economically, some interesting things will occur.