Credit Cards -- The Next Credit Crunch

  March 10, 2009 (Reuters) – Prominent banking analyst Meredith Whitney warns that "credit cards are the next credit crunch," as contracting credit lines will lower consumer spending and hurt the U.S. economy.

  "Few doubt the importance of consumer spending to the U.S. economy and its multiplier effect on the global economy, but what is underappreciated is the role of credit-card availability in that spending," Whitney wrote in the Wall Street Journal.

  She said though credit was extended "too freely over the past 15 years" and rationalization of lending is unavoidable, what needs to be avoided was "taking credit away from people who have the ability to pay their bills."

  Whitney said available lines were reduced by nearly $500 billion in the fourth quarter of 2008 alone, and she estimates over $2 trillion of credit-card lines will be cut within 2009, and $2.7 trillion by the end of 2010.

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