Commentary: Responsible borrowers shouldn’t pay for ills of easy credit

This editorial appeared in The (Tacoma) News Tribune.

Welcome to the U.S. Financial Crisis: Credit Card Edition.

Banks, already battered by bad mortgages, are now bracing for more bad news as squeezed consumers default on their credit cards. They are pulling back on new credit offers and putting stricter limits on existing accounts.

A tighter supply of plastic money was long overdue. But as banks pull back, responsible borrowers deserve some shelter from the fallout.

Lenders have reason to panic. Americans carry more credit card debt than Congress agreed to spend on its Wall Street bailout package last month. Banks already have written off an estimated $21 billion in bad credit this year and could lose twice that between now and 2010.

The nation’s nearly $1 trillion credit-card balance pales in comparison to the amount owed on U.S. mortgages. But credit card debt is riskier. When a customer can’t pay his Visa bill, there is no property for the bank to sell to recoup some of its losses.

It will only get worse as credit dries up and unemployment continues to rise.

Consumers who have been buying goodies with money they don’t have will no longer be able to buy themselves more time by tapping home equity or transferring old balances to a new card. Meanwhile, families living on the margins could lose the battle to wean themselves from credit as companies lay off workers and cut hours.

Against that backdrop, banks are trying every trick in the book to reduce their risk and even good customers are feeling the pinch.

To read the complete editorial, visit The News Tribune.