by Joseph Kenny | 12/24/08

There may be indications that the global credit crisis may actually be worsened by the efforts of major US credit card companies to protect their interests against threats of increased customer defaults. Many of these issuers are left unable to sell loans to investors, increasing the risk and consequent care that must be taken when extending credit.

Despite efforts to increase control of credit, much of the damage to the markets has already been done; economies across the globe are struggling to deal with rising pressures and high unemployment rates, as many banks have chosen to tighten lending rules.

The weakening of the credit card markets are just the latest in a series of bad financial conditions that have created the crisis. Coming after $500 billion in subprime mortgage write off as well as debt across the spectrum of industries because of last year's credit meltdown, the blow is a serious one to the limping economy.

It was this desire to reinforce the credit markets and increase lending that prompted the Treasury Department to allocate billions of dollars to companies like JPMorgan Chase, Bank of America, Capital One Financial, and Citigroup, in an effort to strengthen their corporate balance sheets.

These moves have made lending much easier between banks, but have done little to restore confidence enough to promote lending with consumers.

With experts saying that with credit card lending standards it may not be a question of if but of when there could be an upheaval similar to what afflicted the subprime mortgage markets. Consequently, many of the same banks are cutting back credit for a number of borrowers who are not able to keep current on mortgage payments.

Additionally, there are moves to make credit less available for even low risk cardholders, particularly the wealthy.

There are no guarantees that such a extreme strategy can succeed. Once credit standards are restricted, there can be unexpected cuts in spending; this will increase pressures on economies. Future earnings may be in jeopardy if credit card companies lose the prospective customers that fuel their businesses.