Business

<< Previous   of   Next >> Jupiter Images  (click to enlarge) The nationwide tightening of credit comes at a bad time for businesses that will rely on it during the holiday shopping season. Associated Press  (click to enlarge) A new credit-card and card reader from Chase Bank with "blink" technology lets users wave their cards near a computer reader instead of having to swipe them through a device. (click to enlarge) Carol Nelson (click to enlarge) John Dickson   ADVERTISEMENT   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Sunday, November 9, 2008 Cautious approach to credit Credit-card companies scale back credit lines and card offers, and that might be bad news for retailers this holiday season. By Yoshiaki Nohara Herald Writer This holiday season is expected to bring a new challenge to retailers and shoppers: the credit-card crunch. As consumers default on their credit-card payments in an eroding economy, lenders are cutting back on their credit-card offers and credit lines. That's bad for businesses that rely on shoppers who use their credit cards to buy big during the holidays. "It's not good for the economy," said Carol Nelson, president and chief executive officer of Cascade Bank. "But consumers are concerned about their financial wealth. It's wise for consumers to consider cutting back." Big lenders such as American Express and Citigroup have been tightening criteria for applicants and shrinking their portfolios to reduce losses on default payments. That's prompting a credit-hooked nation to rethink its habit of buying first and paying later. The trend could help people restore some common sense after an era when companies flooded people with easy credit-card offers with sky-high credit lines, said Alison Sing of Lynnwood. If you can't pay cash for something, don't buy it, advises Sing, who retired in 2005 as a senior economic development officer for Snohomish County. Sing said that he and his wife don't use credit cards except for when they make a major charitable donation such as supporting the scholarship fund at Edmonds Community College. "People are more cautious now," said Sing, 62, who recently filed for Social Security. "I think most seniors try to live within their means." Younger generations may have a hard time weaning themselves from credit cards because they are so used to them, Sing said. "Plastic credit has been the bane of our modern society," he said. "It made it too easy for everyone to have ready gratification and to live outside our means." The credit-card crunch is another development of the ongoing financial crisis that has mainly stemmed from bad mortgage loans. As banks lose money in the real estate market, they have become hesitant to lend out of concern that they may not be able to recover their investments. "They are tightening up because they don't have as much capital as they did," said Deborah Bortner, director of consumer services of the Washington State Department of Financial Institutions. Bortner said she started hearing about credit-card providers cutting back on their offers about a year ago. Lenders are also limiting other options traditionally tapped to pay off credit-card debts, such as home equity lines, she said. Big lenders have been expanding more aggressively than local banks because they have resources and technology to monitor big portfolios of credit-card customers, Cascade Bank's Nelson said. Everett-based Cascade hasn't changed its small credit-card program because it already has strict criteria, Nelson said. That's the case for Frontier Bank as well, said John Dickson, the Everett-based bank's president and chief executive officer. "We've always had a higher standard," Dickson said. "We haven't changed that standard lately." Fewer credit cards are likely to hurt retailers this holiday season, Dickson said. He has a simple advice for consumers preparing for holiday shopping while making ends meet on a tight budget. "You shouldn't put more money on your credit cards than you can pay off," he said. Reporter Yoshiaki Nohara: 425-339-3029 or ynohara@heraldnet.com. READER COMMENTS Be the first to comment. You must be a registered user and verify your e-mail address to post comments to blogs or articles on HeraldNet. To register, click here. To read other terms and conditions, click here. Log out

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