No Soup For You

With the economy still hot and people piling on debt, some banks like Capital One and Discover are getting jittery about the possibility of big losses in the near future.  A recent Wall Street Journal article points out that both banks are starting to tighten lending standards, as both banks have good portions of their customer bases with credit issues.

You may have to have a subscription with Wall Street Journal in order to view the entire piece.  If you haven’t already signed up for the newspaper, here’s a great offer for 1,000 miles for $1 a two week to three month subscription.

Capital One and Discover, on the other hand, signaled they are paying more attention to how consumers use their cards’ spending limits. Mr. Fairbank said on the earnings call that the company had “further dialed back” during the past year on spending limits for newly issued credit cards and on raising existing cardholders’ spending limits.

The moves come as U.S. consumers have taken on record levels of debt.  According to the article, “the total dollar amount outstanding on credit cards, personal loans, student loans and auto loans in the U.S. has never been higher.”  The credit pinch was felt earlier in the year in the subprime market and is now filtering into prime customers.

“In so many ways, one can’t help but be struck by…just how good the economy [at] this point is,” Capital One Chief Executive Richard Fairbank said on the company’s earnings call. “And in some ways, it almost feels too good to be true.”

I am on my second Discover It card and don’t have a current Capital One card (unfortunately).  My Discover It credit limit is higher than my previous card from a year ago, but that’s not saying much, as both limits aren’t substantial.  I’m not sure how much these changes will affect people in the points and miles hobby, but there has been a good deal of talk about elevated lending risk from various banks over the past six months or so.