Good news! Less junk mail! Bad news! You have no credit!

29 October 2008

So is there an upside to the global financial crisis? Yes there is. Junk mail, in particular the wads of introductory offers from credit card companies that pour through your letterbox like so much pat from a cow's arse, is likely to slow to a trickle. Alright, so it's hardly a deal breaker, but it's good news for posties, too. Those bags look very heavy. And it's good news for the environment, what with all that saved paper. Although thinking about it, it may put some printing and direct mail companies out of business. Damnation. Nothing's ever straight forward, is it?

The New York Times reports that lines of credit are becoming ever more scarce in the US, and companies are no longer quite so free and easy with shiny introductory offers. If companies here follow suit, then there'll be less carpet-bombing of the country with postal and email campaigns is likely to slow, as the New York Times reports:

The pullback is affecting even creditworthy consumers and threatens an already beleaguered banking industry with another wave of heavy losses after an era in which it reaped near record gains from the business of easy credit that it helped create.

Big lenders — like American Express, Bank of America, Citigroup and even the retailer Target — have begun tightening standards for applicants and are culling their portfolios of the riskiest customers. Capital One, another big issuer, for example, has aggressively shut down inactive accounts and reduced customer credit lines by 4.5 percent in the second quarter from the previous period.

While such changes protect lenders, some can come back to haunt consumers. The result can be a lower credit score, which forces a borrower to pay higher interest rates and makes it harder to obtain loans. A reduced line of credit can also make it harder for consumers to manage their budgets, because lenders have 30 days to notify their customers, and they often wait to do so after taking action.

Even those with good credit ratings are not excepted. American Express, which traditionally catered to more upscale cardholders, said it would be increasing effective interest rates by 2 or 3 percentage points for some of its credit card holders — a move that could, for example, push a 15 percent rate up to 18 percent.

And lenders, over all, are slowing the flood of mail offers to a trickle with moves that would translate for the average American household into about 13 fewer pieces of credit card junk mail a year than its peak in 2005.

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