by Joseph Kenny | 03/2/09

A recent trend has manifested in the credit card industry, and it's one that should come as little surprise to most who have been watching the economic stage as of late.

Namely, they're cutting off supplies of credit all across the country, out of fear that borrowers will succumb to fear themselves and engage in reckless spending on credit lines. Of note, however, is that this trend seems to be affecting not just those borrowing on credit cards, but also those with bank loans.

The possible implications of this might not be immediately obvious, however. While at first it might just seem that the only effect will be that borrowers are unable to unwisely run up bills in the midst of financial collapse that they likely won't be able to pay off anyway, industry experts are forecasting otherwise. In addition to that, it's also the case that the sudden crunch on credit is likely going to harm many borrower's credit scores unfairly, by making them look like riskier borrowers than they actually are.

Not surprisingly, a great deal of animosity has sprung up regarding these actions, as many of the groups that are cracking down are the ones who received government bailout money in recent months. Obviously, the purpose of that money was to inspire banks and lenders to be more confident and comfortable in their lending practices and as such borrowers who have been scorned are left feeling as if they've gotten the short end of the stick.

When asked for comment on the matter, most lenders were not very forthcoming about the exact catalyst behind these decisions, except to say that outright cancellations are becoming a part of standard account review procedures in light of the current economic conditions. As lending standards continue to rise even in the wake of government bailouts, it seems the credit crisis is going to continue to get worse before it gets better.