A delayed reaction may be worse than no action at all, particularly if it causes you to overreact. Credit card companies may be finding out the truth of this as they seek to cut off credit and minimize their exposure to rising delinquencies. In doing so, however, they might be creating the very thing they're trying to forestall.

A faltering economy and rising unemployment are pushing delinquencies to higher levels. According to credit reporting bureau TransUnion, the rate of credit card holders delinquent 90 days or more rose nearly 6% in the third quarter from last year and was up almost 5% from just the second quarter. Meanwhile, the average debt per borrower rose 6% to $5,710 over last year.

As people turn to their credit cards to get them through this difficult period, the credit card companies are turning them off. In addition to lowering credit limits, credit card issuers like Capital One Financial (NYSE:COF) are also boosting the minimum payments required. At 7.86%, it also had the highest charge-off ratio of any of the top 10 issuers.

When a credit card company is unable to collect on the balances owed, it eventually writes them off. An indicator of that is called the "roll rate," which is the percentage of cardholders who go from being delinquent on their payments to not paying them at all. According to a report in today's Wall Street Journal, credit card companies are concerned about their roll rates escalating.

American Express (NYSE:AXP) say its roll rate rose to 47% from 35% last year, while Capital One's jumped to 34% from 28% the year before. It helps underscore why both sought to expand their depositor bases, albeit in different fashions. AmEx became a bank holding company to ease its access to TARP funds while Capital One agreed to acquire Chevy Chase Bank after it received TARP funding.

The three largest credit card issuers in the country are JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), and Citigroup (NYSE:C), accounting for nearly 60% of the $724 billion in outstanding debt at the 10 biggest card issuers in the U.S. Oppenheimer analyst Meredith Whitney expects issuers to reduce credit lines by more than $2 trillion over the next year and a half.

While MasterCard (NYSE:MA) and Visa (NYSE:V) have some protection in that many of their cards are debit cards rather than credit cards, purchase volumes are also on the decline as consumers change their spending habits.

As prices rise, jobs are lost, and the recession deepens, access to a credit card may be all individuals have to get by. Yet in trying to cushion their own losses by reducing available credit, raising minimums, or cancelling accounts altogether, card issuers may just end up hastening the rate at which cardholders fall behind. The snowball effect will mean higher delinquency rates, increasing roll rates, and more write-offs. There won't be anyone with whom to share credit for the problem.  

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