Cartoon 662: Card Conspiracy

A thing qualifies as a conspiracy when there is collusion among competitors to surreptitiously enhance profitability in a coordinated manner restricting competition.

On the one hand the Government is giving money to banks as part of the bailout. The purpose is to loosen credit. But the banks that own credit cards have entered into an agreement to do just the opposite for consumers. Their goal is to improve their balance sheets by gathering the money back from credit cards.

The credit card companies are doing this by reducing the limit amounts on credit cards. The reductions are tailored to the individual. It is based on usage to cause the individual to quickly max out the credit limit or stop using the card. In a normal situation, in a competitive market, the Consumer would just transfer their balance to another card with a higher limit. But all the card companies have thrown up a simultaneous block to balance transfers, collusion.

The card companies are not targeting specifically the people that are late with payments.  They are targeting people that consistently pay their monthly payments and even a bit more. These are the people they can most likely trap into paying the entire outstanding balance and not walk away from the debt. These people often have jobs were satisfactory credit is a condition of employment.

In America, a sizable percentage of the population uses credit cards as a source of life style funding. The holiday season is coming. Most people put some of their holiday purchases on their credit cards. The reduced limits and current job market is causing consumers to contract in spending. Their spending has a cascading impact in the economy. It begs the question why the bailout without specific strings being attached? This is especially true in terms of financial institutions. Britain did not do this with its bailout.