I don’t think it affects the credit card industry much. Rates may change as the economy changes. However, credit cards have always been unsecured credit. There was no illusion of AAA-rated safety and asset-backing built into the market on these.

Just like the illiquidity of CMOs is drying up non-conforming mortgage availability, illiquidity of CDOs will dry up credit card business by non-depository institutions. I am not sure if the CDO market is as stuck up right now as the CMO market. I think the consumers are not (yet) defaulting on their CC debt as much as on mortgages – may be they are thinking that foreclosure is a slow process compared to not being able to buy groceries. Also, I don’t think there is this huge exploding debt scenario like ARM resets. That should keep CC debt a bit more manageable.

FormerSD: Yes, at least some CC debt gets recycled via CDOs. Otherwise, non-depository institutions can’t issue consumer debt.

Just like the illiquidity of CMOs is drying up non-conforming mortgage availability, illiquidity of CDOs will dry up credit card business by non-depository institutions. I am not sure if the CDO market is as stuck up right now as the CMO market. I think the consumers are not (yet) defaulting on their CC debt as much as on mortgages – may be they are thinking that foreclosure is a slow process compared to not being able to buy groceries. Also, I don’t think there is this huge exploding debt scenario like ARM resets. That should keep CC debt a bit more manageable.

FormerSD: Yes, at least some CC debt gets recycled via CDOs. Otherwise, non-depository institutions can’t issue consumer debt.

A co-worker complained recently that the rate on his credit cards had just doubled — to more than 20 percent — for no particular reason. He said he had no late payments or other problems, and that a customer service rep had told him the rate hike was a “business decision.”

My guess was that the rate hike was linked somehow to the liquidity crunch and CDOs. His card carrier does have a consumer banking unit (the “what’s in your wallet” guys) but I doubt their deposits cover more than a tiny fraction of their lending.

I just find it odd that up till about two-three weeks ago, I was getting four or five credit card offers every week. Not a one has arrived in the last couple of weeks.

I just find it odd that up till about two-three weeks ago, I was getting four or five credit card offers every week. Not a one has arrived in the last couple of weeks.

Same with me; I might have received one or two solicitations in about 2 weeks compared to the usual 6 or 8. But I did recieve an offer to refinance my mortgage, no questions asked. There will be lot less paper in the recycle bin in the future!