'Uh-oh. Game's up': A blogger's thoughts on easy credit
Posted
Feb 22 2008, 05:44 PM
by
Karen Datko
Could it be true that credit card companies are tightening access to easy credit, and that consumers are curtailing their collective spending spree? Recent news reports prompted blogger Michael B. Rubin to opine on those subjects at Beyond Paycheck to Paycheck.
He notes that the Wall Street Journal reported that credit card companies are getting "tougher on borrowers" because of increasing delinquencies. "Get it?," Michael writes. "This means that even the credit card companies are now saying, 'You know what? Maybe that guy who's completely maxed out his credit card and has been unemployed for three years might not be a good bet to lend more money to.' And, (gasp) they cut him off."
That's a bit of an exaggeration (we hope), but you get the point.
He also notes that discretionary spending by consumers is dropping. While some say that's bad for the economy, Michael thinks it's a good thing. "Individuals can't simply pay back old debts by borrowing new debts forever," he writes, adding, "The government can, but that's only because it can print money. You can't."
(Another blogger, CJ at The Coin Jar, also notes the drop in credit card use by consumers in a post called "Consumers' credit card pain may be a long-term gain." It may not be good for the economy in the short run, he says. "But long-term, more consumers paying cash and being more cautious about debt is a good thing. How truly healthy can our nation be financially if the economy tanks because consumers stop buying things they can't afford?")
Finally, the WSJ article notes that people are having difficulty tapping their home equity for living expenses because housing prices are falling. Michael concludes: "Now, suddenly, it's hard to pay off your credit card bills by simply borrowing money on the value of your home. Uh-oh. Game's up. Time to pay your bills."
What's a person to do? It's time, Michael says, to live within your means.
