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Major Banks have been hit hard by bad mortgages, are now, fearing that troubled financial institutions are going to have another consumer headache to deal with: credit card defaults.There has been no shortage of warnings about the business as the economy continues to sputter.A widely used rule of thumb is that charge-offs typically climb to 1 percentage point above the unemployment rate. And many expect the unemployment rate to keep rising throughout the year.With that in mind, analyst think the charge-off rate could wind up peaking at a level north of 10%.Of course, this is not the first time that credit card issuers have had to contend with relatively high unemployment. During the recession in the early 1980s, the jobless level peaked at 10.8% in late 1982. But some experts point out that this is a much different time for the industry.Not only did a much smaller slice of the American public own a credit or charge card, the amount of credit issued by the industry was just a fraction of what it is today. As of January 2009, the amount of outstanding credit in the industry totaled just under trillion, compared to just .5 billion in 1982. Banks have a whole other host of problems to worry about now that they didn’t have to contend with in the 1980s.Democratic lawmakers have proposed legislation that would allow so-called “mortgage cram downs,” which would let judges reduce mortgage debt for individuals who have filed for bankruptcy.Many in the banking industry fear that passage of this bill could prompt many homeowners to file for bankruptcy and default on many of their other debts, including credit cards.But some analysts point out that the magnitude of any future credit card problems will be mitigated by the fact that most banks’ credit card businesses are a fraction of the size of their ailing mortgage portfolios..What is also encouraging is that banks’ credit card operations have become much more adept at adjusting to tough economic times after years of practice, including the downturn that followed the dot-com bubble earlier this decade.Facing additional losses, credit card issuers are doing what they can to insulate themselves from further losses, including lowering credit limits for some cardholders, closing accounts or getting out of the business altogether. The new credit card bill signed by the President is thought of being a victory for consumers, financial experts say the bill could have unintended consequences as credit card companies look for ways to make up for potential lost revenue. Those measures could include more cards with annual fees and the loss of a grace period before interest accrues, which would affect even those consumers who pay off their balance each month.”So we’re not going to give people a free pass, and we expect consumers to live within their means and pay what they owe,” Obama said. “But we also expect financial institutions to act with the same sense of responsibility that the American people aspire to in their own lives.” This all said the bill won’t take effect for nine months, so I encourage you to Control Your Debt. Creditors are not going to just lie down and take it on the chin; they have the will to get their way .debt settlement

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