Creditors Fed Off Equity Boom, Creating 'Double Bubble'

As home values boomed, banks raised credit limits and extended offers for new cards, urging consumers to pay off the debt by drawing on their equity, USA Today reports. Many of those borrowers now face high interest rates on homes tapped of equity and hemorrhaging value—and the boom in foreclosures has been accompanied by a 6-year high in credit-card delinquencies.

USA Today’s analysis found that from 2001-06, the average credit-card spending limit rose 17%, to $8,158—even as the number of new cards issued to consumers with bad credit doubled. To pay for it, consumers turned to their most valuable asset for a total $538 billion in home-equity loans. (More credit card stories.)