by Joseph Kenny | 11/11/08

Only a short time ago, it seems, consumers were readily applying for credit cards left and right. Not only individuals but also businesses were taking advantage of the ease with which credit cards could be obtained. It is not at all uncommon for people to live on credit cards rather than make use of savings of other funds.

Credit cards are quick fix for many consumers in America, a means to get the job done and worry about the cost later. More recently, business owners and entrepreneurs, in particular, have had to rely more on credit cards than ever. Personal debt has skyrocketed as cards have been used to finance new ventures and covering operating costs on existent ones.

The problem with this scenario is that credit cards as a mode of funding is disappearing. The main culprit for this turn of events is the slumping economic situation in the US. Cardholders that have overextended themselves are now struggling to pay their bills. The effects on card companies are obvious. Past due accounts and defaults have increased in the last 5 or 6 years.

With major credit card companies dealing with enormous charge-off rates, profits are suffering, a point at will cut down the available credit for new users.

This is a big blow to businesses that rely on credit cards to finance their operations. Approximately 65% of US banks have placed restrictions on their credit card loan policies. The minimum credit score has been raised; this, alone, will cut down the availability of credit lines for those with bad credit or low credit ratings.

Major credit issuers like Chase, Bank of America, and HSBC have reduced the amount of direct mail efforts they are sending out by more than 15%.

These latest measures have come only three years after new legislation on bankruptcy reforms rocked the credit card industry in 2005. Stringent policies have made it more difficult for cardholders to seek bankruptcy to deal with credit card debt.