Early this year, financial prognosticators were saying that the credit card industry was not going to go the way of the mortgage industry (i.e. totally implode) because credit cards had a better financial base.  After all, if a credit cardholder decides to “foreclose” on a credit card, it’s not nearly as damaging to a credit card company as foreclosure on a house.  A mortgage can run hundreds of thousands of thousands of dollars. Anyone with hundreds of thousands in credit card debt is in serious financial trouble.  $30,000 is a lot for a credit card, while that’s dirt cheap for a house.

Add to that the fact that credit card companies are making a relative killing on interest rates and you’d think that credit card companies would be able to weather the financial crisis.  If only that were so.  There’s continuing talk that the credit card industry will be the next big thing to fall apart.  Not only are credit lenders tied to losses in the mortgage industry, but credit cards are having problems all their own.  Recent news from American Express is likely the first in a long line of potential problems.

Amex’s Problems

American Express recently requested $3.5 billion from the Feds as part of the bailout package.  Amex has stated that they’re suffering from lost revenue due to the credit crisis.  In the past, Amex has remained liquid by packaging credit card debt and selling them to investors in the securitization market.  If this sounds eerily familiar, this is what led to the subprime mortgage meltdown, as bad credit mortgages were also packaged and sold to investors and then lost value.  The market for credit-card back securities is fading.

It is surprising, in some respects, that Amex is having trouble.  While spending is down overall, it would stand to reason that credit spending is up due to people not being able to afford necessities with cash.  Buying groceries on credit may not be so financially wise, but for some people it’s the only option.  Alas, it turns out that people are cutting down on spending both with cash and on credit.  Couple that with increased defaults and it is not surprise if credit card companies are feeling the hurt.  For American Express, third quarter profits fell 24 percent, or 70 cents a share.

What Does This Mean for Credit Card Holders?

OK, that’s all well and good.  Amex fell 24%.  What does that mean for your current credit cards, or if you are looking to apply for a card in the future?  Is everyone going to get a 30% APR?  Does good credit matter anymore?  Here are some answers.

If you have an Amex card, you may already be feeling the heat.  Amex recently lowered credit limits for 10 percent of their cardholders.  Don’t rely on notifications because it is possible your credit limit may go down without your knowledge.  What will happen is that you’ll go over the limit and have to pay the resulting fee.  As most credit card terms state that the issuer can change rates or fees “at their discretion,” your APR and fees could very well go suddenly up.  Fact is, if you have an existing balance, there’s not much you can do about this, as it’s written in the card’s terms and conditions.

Your credit cards will still work, however.  One of the fears pre-bailout was that any inaction would totally freeze credit markets so your credit cards would be worthless.  That didn’t happen and it likely won’t happen in the future.  But whenever a lender is taking a hit, be certain that they’re going to raise rates and fees to make up the difference.  This is even the case if you’ve hunted around for the best credit card deal, you have

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According to prominent bank analyst Meredith Whitney that the US credit card industry may reduce credit lines by over $2 trillion dollars over the next 18 months on fears of a worsening economy and regulatory changes. If this were to be true, it could mean that credit card limits could be reduced by as much as 45%. Regardless of the actual amount and severity of the credit line pull back, most credit card companies are more cautious about new customers and existing customers alike.

While you many not think this affects you cause your credit cards are not maxed out, there may be other repercussions. Most notably if you carry a balance and your credit limit is lowered, your credit card utilization (credit card balance/credit limit) may increase. Higher credit card utilization could then lower your credit score which could then increase your interest rate or lower your limit again. It is a vicious cycle and can be very unfair. Here are a few tips to avoid the trap.

Keep an eye on your credit cards limits. Your credit card company should notify of any impending changes. But with all the junk mail it can be easy to miss. Almost most people take their credit limit as a constant and only look at balances.

Try to lower your credit card debt. This is easier said than done but this should be a goal at all times to improve your credit.

Have several credit cards. Having a 3-6 credit cards gives you options should one of your issuers lower your limit or increase your interest rate. If you are looking for a card, these are some of the best credit cards for each credit range.

Keep your balances on any given card low. High credit card utilization on any single card can be a sign of future risk so make sure that your credit card utilization is lower than 35% on any single card.

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The impact of the credit crunch is already rearing its ugly head as far as holiday shopping is concerned, because projected consumer spending online is remaining steady at $100 to $250 dollars on average. According to the eBillme Online Spending Index, a quarterly survey that is designed to examine online spending by consumers, the credit crunch is definitely expected to have a strong impact on holiday spending. Index results for the fourth quarter are showing that the credit crunch is causing many shoppers to significantly decrease how much they are using their credit cards, and is also impacting the access that consumers have to credit, resulting in a shift to cash as a necessary alternative.

Thirty one percent of all respondents had indicated that they would be more likely to purchase online if they could pay with cash and have an overall improved control over their finances. This is actually an opportunity for online merchants to optimize their checkout systems by providing additional cash alternatives. The eBillme Online Spending Index, an index that is conducted by Javelin Strategy and Research polled 1,600 different consumers in order to measure their projected online spending, as well as the factors which were influencing that projection, such as the economy, available payment options, financial control and security. This quarter, the index surveyed consumers about their holiday spending in addition to the normal survey. According to data from this fourth quarter, the credit crunch is continuing to put a serious damper on consumer use of credit and consumer access to credit.

- 34 % of consumers are closer to their credit limit than they were a year ago.

- 45 % of consumers surveyed have used their credit card less in the last three months, looking for non credit payment options instead.

- 55 % of people surveyed had indicated that their available credit decreased this holiday season in comparison to last year.

- 48 % of consumers are delaying purchases as a result of uncertainty in the economy.

This quarter’s index also found that as much as 46 percent of all consumers prefer to avoid black Friday shopping in favor of online shopping. As many as 13 percent of respondents are planning to do more of their shopping on Cyber Monday, which is the official beginning of the online holiday shopping season.

The index is based on data that was collected after being taken by an online consumer survey that was deployed in August of 2008. The sample size was 1,608 respondants. The next index by eBillme will be released in January of 2009 and will be posted on the eBillme blog website. You can also visit the eBillme blog website to view more data regarding the current index and the information polled about the credit crunch and its impact on consumer shopping during the holiday.

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There is still money available to be lent out, but in order to get it, people buying homes and businesses must have good credit or plenty of equity. Despite all of the talk surrounding the credit market which is supposedly completely frozen, it is still possible for consumers to pick up big ticket loans all over the Las Vegas Valley and elsewhere, provided that they can meet the terms which are much more stringent now.

According to a local branch manager for U.S. Mortgage of Nevada, nobody is going to offer 100 percent financing right now. If they did offer 100 percent financing, it would come with at least a 17 percent interest rate if not much higher. And if you want to take out a loan so that you can make a purchase of real estate for a company, you are going to be paying down a much greater share than if you were to buy that real state only twelve months prior.

Before granting a home mortgage to a consumer, Wells Fargo bank uses several different criteria that they examine for each of their loan applicants. These criteria include debt to income ratio, credit score, two years worth of W2 tax forms, two months worth of bank statements and payroll stubs. Just about anyone would have been able to get a loan two years ago, but today most lenders are being much more prudent in order to protect themselves.

A poor credit score is more than enough to doom an applicant, even when they have enough money to make a down payment. Major banks are rejecting mortgage applications from individuals with credit scores in the 500s, but by raising such a score to 650 or more, those individuals can suddenly qualify for Federal Housing Administration loans. Meeting new thresholds is absolutely essential if you want to obtain the lending that you need despite the credit crunch and the tighter reins that lenders are holding on their money.

Some lending institutions like Nevada Bank and Trust have taken truly black and white approaches to lending. Even people they know are reputable are losing out to hard line decisions because of how tough the credit market is right now. Small businesses used to easily secure loans of 80 percent or more of the total cost of real estate, but now the numbers are much lower, at 75 percent for owner occupied real estate, 70 percent for investor owned properties and even less for specialty operations. It isn’t just the banks that are playing it safe, but all lending institutions out there.

What it really boils down to is what your credit is like. If you have top tier credit, not even the credit crunch can bring you down. It’s all about having good credit and keeping your credit score up if you do not want to be negatively affected by the credit crunch.

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There are many consumers out there that want to get out of debt and become homeowners, either for the first time, or once again. But before these people can qualify for the lending that they need, they absolutely must find ways to raise their credit scores. In order to raise a credit score, these consumers have to significantly pare down their debt levels.

This is a problem that is quite common to many Americans, because the credit crunch that we are experiencing is putting serious pressure on consumers to make a dent in their level of debt so that they can return to a more stable life. In order to accomplish this, it is absolutely vital that consumers devise a plan that will allow them to pare down their debt and significantly raise their credit score in the process.

If your goal is to get out of debt, then your first plan of attack is going to be to put together a workable strategy, according to credit counselors. Everyone and anyone can fall into the debt trap, but the consumers who are capable of getting back out are those who are willing to put together an organized method of overcoming those debts. Having a poor credit score can prevent consumers from taking out loans that are vital in orchestrating home repairs, automobile repairs, mortgage refinances and other vital expenditures that simply cannot be avoided. Lenders will often decide that these consumers are too much of a risk to lend to, denying their claims for lending to tackle unexpected expenditures.

A credit score is a number that is designed to summarize your credit risk. This number is based on your credit report during a given period of time. This credit score, which generally ranges between 300 and 850, allows lenders to better estimate the chances of whether or not you will repay a loan that is granted to you. The higher your credit score is, the better deal you will get. Because credit markets have been tightening in the past few weeks, lenders are beginning to really tighten up on their standards, meaning they are requiring much higher credit scores before they will lend out any money. This is why consumers are being forced to tackle their debt before they can get the lending that they need.

The key to paying off your debts is to know what you owe, and then to prioritize your debts. Add them up and determine where they fall based on category. What debt has collateral? What debt is secured? What debt is unsecured? Prioritize by paying secured and collateral based debts first, because you need your home and your car to survive. Then work on unsecured debts, leaving the lower interest rates until last. Tackle your debt slowly, paying off one at a time until you have a handle on your debts and a much nicer credit score and report as a result.

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The financial turmoil that our economy is currently experiencing is regarded as an unprecedented level of turmoil. According to a United States Historian named Steph Friesier, “The time of wielding wealth is over.” What many people do not realize is that there is a lot that consumers can take away from this bank crisis that may someday improve how we relate to money and how we operate within the economy. The Wall Street bubble burst suddenly, and everything seemed to go completely insane, but that does not mean we cannot treat this time of financial crisis as a learning experience.

A few months before the Lehman Brothers company went bankrupt, an executive director within the company which once flourished put his luxury home on sale for a surprising $325 million dollars. Many business tycoons began to sell their luxury yachts and other properties, selling the apples of their eyes. Before this happened, no doubt had been raised about the United States superpower in consumption, as the U.S. had been acting as the engine in the entire world economy, its powerful consumption determining the United States’ role in the global economy as a bellwether. Should the United States consumption diminish in any way, the driving force propelling the economy of the entire world would be knocked from its axis.

What consumers can learn from the bank crisis has a lot to do with tracing the causes to this financial storm. There are numerous different ideas floating around as different nations try to make sense of what has occurred and why it has so easily crippled the economy of major nations around the globe. How can one nation have such a powerful impact on the economies of all other nations across the map? There is an uncommon consensus among economists hailing from different nations, and no one is able to unanimously pinpoint the true influence that the consumption concept imposed itself upon. What snapped the credit links? What created the fall in Wall Street?

Once the balance of consumption collapsed, the new balance would not come into creation quickly enough, causing the world’s economy to seek a brand new bolstering point in order to keep some semblance of balance in place. The ongoing process of dealing with the banking crisis is a process in itself that is being used to seek a new point of economic growth as well as an all new driving force for the world’s economy. Not only is the economy falling in the United States, but like the chaos effect it is driving changes in other nations and drastically shifting the balance of power, at least as far as economics are concerned.

What consumers can learn from the bank crisis, above all else is that the world’s economy is a fragile thing that can easily lose its balance when things go awry. As the United States grapples with its issues regarding lending and credit, other countries and continents are seeing intense changes in the way their economies function.

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EU leaders have recently endorsed a Euro 1.7 trillion dollar ($2.3 trillion) continent-wide emergency bailout plan for the banking industry during summit talks that occurred on Wednesday, then turned their debate to other measures that would prevent global financial crisis from completely stalling the entire continent’s economy. Numerous EU officials and diplomats including Polish Finance Minister Jacek Rostowski confirmed that this plan has been endorsed by leaders of the EU.

The agreement will most certainly pave the way for all 27 nations in the EU to shore up national banks along with other similar financial institutions. Under the broad principles of this bailout plan, individual countries would be coming together to put up a total of $2.3 trillion dollars or 1.7 trillion euros in guarantees and emergency aid in order to help the banks.

This deal is coming after Britain along with 15 other countries utilizing the Euro passed the plan on Sunday. This deal is designed to reassure financial markets and investors that are still feeling shaky that everything possible is currently being done to stop the financial meltdown from becoming any worse. This plan is going to give each of the individual nations a greater amount of flexibility so that they may choose from a wide range of different measures that may solve their individual problems. This may include buying shares in banks, or even guaranteeing loans from savings and interbank institutions.

The European moves are modeled on the Euro 60 billion or $88 billion dollar plan from Britain in order to partly nationalize major banking institutions. The British Prime Minister, named Gordon Brown, has also made a personal promise to guarantee billions of euros worth of interbank loans in order to restore confidence of consumers in the financial sector as a whole. This joint action, coupled with United States plans which are broadly similar and involve taking stakes in large banks, have really helped to turn around many of the severe declines that the world’s stock markets have been experiencing in recent months.

However, many credit markets remain to be in distress because banks are fearful and are only willing as a result to lend to each other at rates which are abnormally high, making credit even harder for businesses and consumers to obtain. EU Lenders have also been debating a call by Brown to hold global wide talks among the top economies in the world, including India, China and the United States among others so that the world’s financial systems may be reformed.

According to Brown, a global summit may be held as early as in November or December, aiming to once again launch stalled global talks of trade in the process. In a document that was passed to leaders, Brown said that banks should rethink how they are addressing risk. He also called for a strengthening of rules covering many issues like how many reserves banks need to hold to make sure that potential losses are covered and that transparency be improved in financial markets as well.

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Right now there is a lot of talk about a recession. The financial buzzword that is out there this month is “Recession” and for good reason. It has become increasingly vital that as American citizens, we begin to understand how we can properly safeguard ourselves against the risk of a potential downturn in the economy. Obviously there are no real guarantees in life, but there are numerous healthy and advantageous steps that can be taken in order to mitigate your losses during any financial turbulence that should occur in the near future. Here are some steps that you can take to recession proof your life.

Clean your finances up.

It is time for you to get serious about your financial health. Look at your budget this month and start cleaning everything up. Decrease your debt slowly but surely, and work to find friendlier credit lines and ways to increase your cash savings and emergency fund savings. By reducing unnecessary expenses and increasing cash savings, you can safeguard against the occurrence of becoming financially strapped.

Focus on creating a financial plan.

If you have a plan, focus on it. If you do not have a plan, put together a one year, five year and ten year financial plan and tweak it over time to ensure that it is meeting your needs.

Make yourself invaluable in your profession.

If you become invaluable at work, it will be much harder for you to find yourself laid off during a recession. Some people are laid off without any warning, but if you can increase your role at work in any way, do so now and you may be spared.

Figure out a way to earn real money.

Can you further supplement your income in any way? If so, now is the time to start thinking long and hard about these opportunities. Consider obtaining a second job, or some other form of part time work that will allow you to increase your bottom line. This is the best way to prepare yourself for a recession, in case you have no idea where you’ll be when the economy takes a turn for the worst.

Think ahead and plan accordingly.

Above all, keep in mind that “this too, shall pass.” Think about the future and work on learning from the past. Think ahead and plan accordingly and you should have no difficulty overcoming the recession with the shirt still on your back. A recession does not automatically mean that your finances have to go south, but the more prepared you are, the better off you will find yourself when the waves die down and things go back to normal, so keep that in mind when recession proofing your life.

There is no way for you to completely and fully protect yourself from a dip in the growth of the economy, but there are plenty of ways to ensure your survival during this period with as little turbulence as possible.

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According to numerous sources at this point, the recent bill to bail out the financial sector was simply too costly, and failed to adequately address the true housing crisis. Many people have opposed the bailout bill because it is failing to do anything to help unemployed workers and homeowners.

According to Senator Debbie Stabenow, “I absolutely believe that this is serious and real and has to be addressed.” She said regarding the $700 billion bailout plan, “But $700 billion is a lot of money, and it did not go over the heart of the issue, which is fixing the housing crisis and creating jobs.” She was quotes as saying in a recent phone interview.

According to Stabenow, 99 percent of all the people who are speaking out about the bill are opposing it despite the fact that it recently passed. The $700 billion dollar bailout bill was passed through legislation last week, allowing the government an opportunity to spend as many as $700 billion dollars to buy off bad mortgage security as well as other devalued assets that are being held by the troubled financial institutions and banks. The legislation was initially sought in order to help credit flow again, preventing a serious economic downturn from occurring.

According to Stabenow and other officials, there are less expensive and more targeted approaches that have been presented that are much more persuasive, despite the $700 billion bailout bill having passed recently. For example, Dan Gilbert recently created a $50 billion dollar proposal to subsidize interest rates on sub-prime mortgage loans and other risky mortgages with adjustable rates, converting them into fixed rate, 30 year loans with lower interest rates. Under such a plan, the government would write down the loan to the true value of the home, subsidizing the homeowner’s interest rate for as many as six years.

Many people are disappointed that the senate did not approve the $61 billion dollar economic stimulus plan, which would have significantly boosted public works projects as well as extended unemployment benefits for workers having trouble finding employment. Similar provisions would have been significantly more effective to deal with the financial crisis according to many experts like Stabenow.

Industry officials in the automotive industry have sought a financial rescue package during tight credit markers because many consumers have been limited in their ability to get car loans. Numerous large scale automakers and dealers like General Motors Corporation, Ford Motor Corporation and Chrysler LLC have all posted steep declines in their sales during this industry-wide slowdown because of a slugging economy.

Many leaders in the automotive industry are saying that they were looking for such a financial rescue plan, but the senate did not seem willing to approve one. When Senate got behind the bailout plan instead, the automotive industry was desperate to be included but it looks like automotive financing options are being left completely out of the $700 billion dollar bailout plan despite desperately needing the assistance just as much as other financial companies.

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Insiders on the economy have mixed ideas on the impact that the economic bailout plan will have on the country. A federal bailout package may significantly boost the psyche of consumers and make banks more willing to extend credit, which could significantly improve the struggling economy across the nation. Unfortunately, it could also send a negative message to residents and businesses that are facing financial challenges without any help from the government.

Despite the public disapproval that is being offered regarding the $700 billion dollar economic bailout which was passed this past week, the economy is desperately in need of this assistance. Financial institutions, according to experts in the field, absolutely need this monetary assistance from the government as soon as is possible in order for our economy to rebound following recent stock market crashes and other drops.

Experts have said that without the bailout plan, more banks would have failed, causing even greater costs to the economy. If the revised $700 billion bailout plan had not been passed, the costs would have been even greater. A number of representatives received an overwhelming number of letters from constituents voicing support against the bill, causing it to fail the first time around. Luckily, within a week the bailout had found its way through because of its necessity to put the economy back right again.

Accordingly to experts in the industry, those who are against the bailout are generally people who do not understand what it is about. Most of the people who were against the initial bailout bill felt that way because they thought of the bailout as a handout to the rich rather than a way to right the economy. The real goal of the economic bailout plan is to allow the government to buy defunct loans from the banks, owning up to one third of the larger banks for a period of time in the process. Once the banks are able to regain some of their own wealth, the government would then be able to sell these bonds back, only losing between $50 billion and $200 billion in the process.

While it may not be the taxpayers’ fault that this is happening, the proper response is not simply to become angry. If the economic bailout plan does not rescue these banks and financial institutions from their current situation, the economy is going to fall a lot further, which will only make things worse. The banks need support, otherwise they are going to begin to lose a lot more money, which is going to prevent them from giving loans and mortgages to the consumers that need them. By rescuing the banks, the government is making sure that these financial institutions will continue to lend money to the individuals and families that need it most, like students and families trying to buy a new home for example.

The $700 billion dollar bailout plan may not be the most ideal solution, but it is much better than the alternative, which is to do nothing at all.

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