Visa is the world's largest credit card company and on Wednesday it posted its first loss since going public in March, $356 million. Keep in mind that Visa and Master Card make money on transactions. So since fewer people are spending money out there. Also, banks which back credit cards are also losing money and that's because people simply can't pay their bills and they're going into default. Of course the consumer is stuck in the middle of it all.
Jerry Love says he has more than a dozen credit cards, but only uses two and is smart about paying on time.
"The Catch-22 is that if you miss a payment, you're late on a payment, every credit card you've got, goes up to that 30 or 29 percent interest rate," said Love, a credit card consumer.
The Federal Reserve estimates Americans are carrying nearly a trillion dollars in credit card debt and an increasing number of credit card holders are in deep trouble.
"It is definitely with some people a dire situation. Some of them are using it to make ends meet, to buy the food, to put the gas in the car," said Castillo, a certified credit counselor with Consumer Credit Counseling Service.
Many analysts say the problem was easy credit extended to just about everyone, which is similar to what happened in the mortgage industry. Now just like home loans, credit card offers have all but dried up --even for people with good credit.
In a week's time, maybe two or three offers in the mail and I haven't see one yet so it's been a couple of weeks since I've seen one," said Caterina Scott, from San Jose.
Banks and other credit card issuers make no apologies for adjusting standards in this economic downturn.
A spokesperson for the American Bankers Association, Peter Garuccio, told ABC7 News "It does not benefit a bank or the consumer to lend money to a customer who cannot afford to repay a loan and a credit card is a loan."
Even people who stay on top of their credit card debt say more regulation is needed to prevent those steep interest rate hikes.
"The whole industry needs to be revised on the credit card, how they do business, because they're a rip off," said Love.
The American Bankers Association says the average credit card interest rate is 12 percent. The Federal Reserve is expected to tighten credit card regulation by the end of the year and those are regulations the industry opposes.
