Average Guy Investing

I reviewed Meredith Whitney’s statements from yesterday looking to see where she got her shocking credit card debt number of 45%.  A Bloomberg article quotes her estimate as a reduction in “unused credit-card lines by 45 percent …”

I am not sure what is so alarming about this number.  If the article is correct, these are “unused” lines of credit.  This would include, for example, a credit card that I have not used in the last couple of years, but which I still have and which the issuing bank must record on its books.  It is my understanding that these unused lines are kept on the books and act to reduce the capital ratios of banks.  It seems to me that it would be wise for any bank that is watching its capital ratio decline to close accounts which are truly unused and take them off the books.

I suspect that a lot of these accounts have bloated over time as customers receive those wonderful mailouts that say “Your credit limit has been incresed by $xxxx.xx.”  Kiss em goodbye.