If you want to know why credit-card interest rates continue to rise — and why the cost of borrowing continues to move higher for card issuers — then you’ll want to read the story written by MarketWatch earlier today. The market for asset-backed debt is terrible. Until this market thaws out, consumers should expect to see rates rise. What’s more, card issuers are likely to remain tightfisted with borrowers. From MarketWatch:Rising defaults on credit-card payments, fueled by rising unemployment and a bleak economic outlook, are triggering clauses in these securities, underscoring the worsening quality in the underlying credit-card loans. This means the freeze in the asset-backed debt market, in which these securities are bought and sold, is unlikely to thaw soon.Tepid demand in the asset-backed market, a primary source of funding for credit-card issuers, hurts in two ways. It raises the borrowing costs for these companies, translating into higher rates for consumers. It also forces the companies to keep more loans on their balance sheets, thus locking up funds they could have extended to credit-card users.In 2008, issuance of credit-card asset-backed securities fell 37% to $56.5 billion from $89.2 billion in 2007, according to Dealogic.
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