Will the credit card crisis be the next shoe to drop in this “House of Cards?”

By Sinclere Lee

Atlanta (BNW) —
We’re just like a of rats in a rundown house waiting for the bottom to fall out, and when it does, we all will be the first to leave and find another place to hide. That’s how it is with America’s financial situation, and when the bottom falls out, most people in this country will run out of the house before it crashes.

However, before the bottom falls out, most people in this country will stay and take advantage of a worsening situation. While the politicians in Washington are trying to save Wall Street from collapse and the auto industry from bankruptcy, the country is about to collapse from the credit card crisis that will do US in because Americans owe over $850 billion in credit card debt.

Sixty percent of Americans have been in credit card debt for more than a year, and the average U.S. household owes $9,659 on its credit cards. These so-called preferred customers have used credit cards to supplement their falling standard of living. A preferred customer, according to industry insiders, is someone with a taste for credit but is only willing to make minimum monthly payments—forever.

Last year, nearly 1/3 of bankruptcy filers owe an entire year’s salary on their credit cards. Moreover, most of Bush's so called ' Stimulus checks' went on credit card payments which will be the next huge financial bubble to burst, and it has the potential of bringing down our entire financial system and the global economy.

Many Americans are living off their credit cards, but be forewarned that bubble is about to burst as more Americans are using high-interest credit card cash to pay at least part of their mortgages. Overall U.S. credit card debt grew by 435% from $211 billion in 2002 to approximately $915 billion year-end 2007.

Here's how bad it is now? Real bad. … By October of 2007, according to a survey of only the leading credit card banks by the Associated Press, the value of credit card accounts at least 30 days late was up 26% from the previous year, to $17.3 billion. Serious delinquencies among some of the biggest lenders rose by 50 percent or more in the value of accounts that were at least 90 days delinquent.

It's a badly shaking House of Cards and it's about to come crashing down and many Americans will pay the price.

While many eyes are focusing on the housing meltdown and its hugely negative effect on an economy clearly moving into recession, few are paying attention to the next bubble expected to burst: credit cards. Combined with the sub-prime losses, such a credit card nightmare has the potential, experts say, of bringing down the entire financial system and global economy.

You and your credit card have become key players in the highly unstable financial crunch. Mortgage lender cupidity and bank credit card greed wedded to financial institution deregulation supported by both political parties, have been made manifestly worse by Bush administration support-the-rich policies. It has brought us to a brink not seen since just before the Great Depression.

Card issuers are also able to respond much more swiftly and flexibly to stormier conditions than mortgage lenders are, by changing interest rates or altering credit limits. That should in theory reduce the risk of a rapid re-pricing of assets. “We are not going to wake up one day and totally revalue the loans,” says Gary Perlin, Capital One's chief financial officer.

If a sudden sub-prime-style meltdown in the credit-card market is improbable, the risks of a sustained downturn are much more real. If lower house prices and a contraction in credit push America into recession, the industry will undoubtedly face a grimmer future. Keep watching for those dorsal fins.

While campaigning in Edinburg, Texas, in February of last year, Barack Obama met with students at the University of Texas-Pan American.

“Just be careful about those credit cards, all right? Don’t eat out as much,” he said. After the foreclosure crisis, he warned, “the credit cards are next in line.”

The report by the research firm Innovest Strategic Value Advisors, titled "Credit Cards at the Tipping Point," predicts that fallout from the credit crunch will lead to a sharp increase in credit card defaults in the coming year, making $1 out of every $10 owed on credit cards impossible to collect. That will force banks to write off nearly $100 billion in credit card debt, it said.

"A long build-up in consumer indebtedness, deteriorating economic conditions and a potential 'sudden stop' in credit availability could cause charge-offs to rise dramatically into 2009," the report says.

Misleading practices by credit card issuers will come back to bite them, say report author Gregory Larkin and Laura Nishikawa, as uninformed consumers who wind up facing surprise interest rate hikes and fees will be more likely to default on their loans. The report concludes that Capital One is most at risk, due in part to its aggressive marketing and "fee-trapping" strategies.

"The data points to an unsustainable business model based on penalty pricing, and the company is worst-in-class by Innovest standards," the report said.

Innovest is an international research firm which analyzes companies based on environmental, social and corporate soundness; it was among the first to criticize the sub-prime mortgage lending business and downgraded now-defunct Bear Stearns in 2006, when its stock was still riding high.

But Making matters worse just as with mortgage debt, credit card debt is put into pools that are then resold to investment houses, other banks and institutional investors. About 45 percent of the nation’s $900-plus billion in credit card debt has been packaged into these pools, and so many companies, not just a few, are at risk of being forced out of business by credit card debt write-offs.

While many eyes are focusing on the housing meltdown and its hugely negative effect on an economy clearly moving into depression, few are paying attention to the next bubble expected to burst: credit cards.

Combined with the sub-prime losses, such a credit card nightmare has the potential, experts say, of bringing down the entire financial system and global economy... we are actually face to face with the results of the most massive failure of our political and economic system since the last Depression.

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