Don’t expect miracles from the credit card industry this year. For those borrowers looking to enter into credit card negotiations, creditors are racked with misgiving about consumer spending and revolving debt behavior. Furthermore, a confluence of factors in the financial world– new federal regulations, checked consumer spending and an inconsistent but improved economy–have credit card companies feeling less than generous.
Regulatory pressure changes relationship between credit cards and consumers
Credit card companies are feeling the heat from increased federal regulatory pressure. These regulations require that credit card companies provide early notice when they intend to change interest rates, amongst other things. In order to maintain profitability, credit card companies are reining in consumer spending and raising interest rates.
For consumers with revolving debt, the past couple years of financial strain have made some people financially solvent while others remain trapped in foreclosures and underwater homes. Both types of debtors are on credit card company books and neither is ideal. Credit card companies thrive in a market where people with cash spend generously and people with some cash have a good credit scores.
Outside fiscal volatility affects credit card companies ‘consumer confidence’
Poisonous housing debt, high unemployment and political maneuvering in D.C. over the country’s financial future continue to put the economy in jeopardy.
Credit card companies, like major mortgage lenders, cannot rely on signs of growth and are doubly burdened by extensive old debt. The debt may not belong to their institution, but it has indirect consequences on their financial dexterity.
Fewer options for everyone
The financial world is ruled by opportunity, and there is little positive opportunity these days. This translates into decreased options for troubled borrowers to enter into credit card negotiations. Credit card companies want to be profitable, but they aren’t going to let go of perfectly good revolving debt without better reasons.