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With the solution to the recession still not in the imminent future, many American credit card firms are resorting to limiting the credit card boundaries of clients. This is seen as a result of tougher US consumer protection rules making life harder for lenders.

This belt tightening also includes the flushing of inactive accounts and the increasing of interest rates. This way, the upkeep of credit cards is softened a bit. “Much of the credit line reduction to date has been driven by inactive account elimination, and I think in some respect you are seeing now a contraction in credit lines to individuals that are active,” said Sanjay Sakhrani, an analyst at KBW.

Here are some of the opinions of business analysts as reported by Reuters:

Credit Suisse analyst Moshe Orenbuch estimated available credit card lines will be cut by about 20 percent, or $1.2 trillion, in coming months, and warned that “further cuts could result from the provisions of the new credit card law.”

Meredith Whitney, one of Wall Street’s best known and most bearish bank analysts, forecast that unused credit card lines will be cut by $2.7 trillion, or around 50 percent, by the end of 2010.

Going forward, credit card companies will purge customers rather than risk higher losses. Sakhrani said customers likely to be cut off are subprime borrowers with weak credit and those who switch lenders, lured by “teaser” rates.

Source: Reuters