Citigroup raises credit card interest to 29.99%. Greedheads or desperation move?

The comments over there are interesting, in particular the commenters trying to make sense of the move in terms of a larger/long-term plan: for example, that the CC companies may be trying to deleverage or deflate the whole system (lenders and debtors both) all at once for reasons that aren’t quite clear to me.

All I can say is that they’re giving the CC companies too much credit (no pun intended). Nothing the creditors, or the banks, or Wall St. has done over the past decade and more has shown me that they have any ability to make decent long-term decisions. I think the answer is pretty simple: deteriorating financial positions + greed + impending credit card regulation = short-sighted stupidity. One of Mish’s links puts it this way:

If this interest rate change prompts people to pay down just 25% of their credit card debt over two year’s time the impact on GDP simply from paying down the debt as opposed to holding it level will raise the impact to approximately 1.9% of GDP, or about $270 billion annually in foregone consumer spending. Good luck with your “recovery” thesis folks.

Sheesh.

One comment

EGrise

Sun, Oct 25, 2009 / 10:06 am Reply

The comments over there are interesting, in particular the commenters trying to make sense of the move in terms of a larger/long-term plan: for example, that the CC companies may be trying to deleverage or deflate the whole system (lenders and debtors both) all at once for reasons that aren’t quite clear to me.

All I can say is that they’re giving the CC companies too much credit (no pun intended). Nothing the creditors, or the banks, or Wall St. has done over the past decade and more has shown me that they have any ability to make decent long-term decisions. I think the answer is pretty simple: deteriorating financial positions + greed + impending credit card regulation = short-sighted stupidity. One of Mish’s links puts it this way:

If this interest rate change prompts people to pay down just 25% of their credit card debt over two year’s time the impact on GDP simply from paying down the debt as opposed to holding it level will raise the impact to approximately 1.9% of GDP, or about $270 billion annually in foregone consumer spending. Good luck with your “recovery” thesis folks.

Sheesh.

Share:

One comment

Leave a ReplyCancel reply