Avoiding Those Credit Card Blues

Credit card companies are cracking the whip.

With total household debt at $7.4 trillion, nearly double the levels seen a decade earlier, credit card companies are raising a variety of rates and fees to control credit quality and keep profits high.

Indeed, such increases are helping to staunch losses accrued by delinquent payments. In the fourth quarter of 2001, credit card companies wrote off $6.30 for every $100 of their portfolios due to bad loans, according to the American Bankers Association. "That's at the highest level since they began tracking the information in 1985," says Keith Leggett, senior economist for the ABA.

Meanwhile, the delinquency rate on credit cards was 3.88% in the fourth quarter of 2001, the second-highest rate ever, Leggett adds. ...