Bloomberg (via Yahoo News) reported that banks are extending even more credit via increased limits to consumers who are not even asking for it. Many of these same consumers are already cash strapped and overwhelmed with existing debt. The idea is that the banks are encouraging consumers to utilize this credit to increase the banks’ profits.
“It’s like putting a sandwich in front of me and I haven’t eaten all day,” said D’Ante Jones, a 27-year-old rapper known as D. Maivia in Houston who was close to hitting the ceiling on his Chase Freedom card when JPMorgan Chase & Co. nearly doubled his spending limit a year ago without consulting him. He soon borrowed much more. “How can I not take a bite out of it?”
The banks say the increases are good customer service and that they raise spending limits carefully, discourage reckless borrowing and let customers reverse the increases at any time.
Yahoo News
It’s no coincidence that this comes at the same time as consumer credit card debt surpassing its prior peak peak reached during the financial crisis, hitting a record of $880 billion in September according to the New York Federal Reserve consumer credit panel.
The money is flowing freely and for many consumers it’s hard to resist.