The rules of the credit industry game are quite easy to master. Banks give consumers credit to buy anything they want while consumers have to pay the banks, with interest of course. But in a topsy-turvy world, credit issuers would help cash-strapped cardholders with their debts. That world may be here, right now.
In an almost bizarre change of thinking, banks are helping financially troubled Americans pay off their credit card debts and loans. The move, though, not entirely unheard of, raises some eyebrows here and there.
Industry experts say that the new plans of many banks focus on recovering any money they can at all cost, instead of just giving up and letting the debt go uncollected.
Recent data collected from industry players are pointing to increasing charge-offs and more delinquencies in recent months. With no end seen yet for the economic recession, the credit industry is set lose billions more on top of the $82 billion lost due to delinquencies alone. That figure amounts to about a quarter of all transactions made through credit cards.
The current unemployment rate also leaves a lot to be desired. Many experts say that the number of uninsured Americans have a significant relationship with predicted charge-offs in the near future. The federal government has warned that unemployment can shoot up to 10 percent by the end of the 2009 or early 2010. This revelation has made many banks extremely concerned about the potential losses from charge-offs.
Even the rising numbers of delinquencies has gotten card companies on their toes. Analysts say that delinquencies can often be precursors to charge-offs. To prevent any more losses, some large banks and creditors are reaching out to selected cardholders in the hopes of retrieving whatever money they can.
Financial institutions like the Bank of America have announced plans to modify some of their cardholders' accounts, giving them a better chance at repaying debts. The company is set to issue some 1.2 million modifications on its cards, a 20 percent increase over 2008.
Industry experts say that card issuers will likely offer repayment programs to cardholders in the earlier stages of delinquency. Still, analysts warn that not all consumers can avail of these programs. Banks will be keen on helping cardholders that are in real financial distress.
Consumers who think they can qualify for repayment programs can try to contact their card companies. Most issuers are easing up on eligibility requirements to attract more potential paying cardholders, specialists add. They also explain that most banks prefer not to reveal who they favor giving second chances.