If credit is so tight for commercial borrowers, why are so many households still deluged with mail from banks offering credit-card money at 3.99%? The answer came to light yesterday in news suggesting that the source of such loans is about to dry up. Banks have typically raised cash for revolving charge loans by issuing bonds that as recently as March topped $10 billion per month. The teaser rates to credit-car consumers varied from 0% to 8% and were usually good for six months. Bonds backed by credit-card payments have always been considered very secure, since default rates were low and payments predictable. However, both of these factors have taken a turn for the worse due to the deepening recession, causing the market for such bonds to wither. The result is that their issuance has been more than halved, to $5.26 billion in June, and then to $4.4 billion in July. Teaser loans have made it quick, cheap and easy for households strapped for cash to cover their monthly bills, and the skillful juggler of such loans would have had little trouble since the early 1990s borrowing, more or less in perpetuity, tens of thousands of dollars at rates of 4% or less. Usually, there was a small up-front fee of 2% to 3% associated with the loan, but the fee was almost always capped at $50-$75. That meant a credit card customer with a $25,000 limit could have borrowed that sum for interest payments totaling less than $400 over the six-month life of the loan. The rate would typically skyrocket to 15% or more after the teaser period expired, but borrowers would have had little trouble rolling to a new teaser loan proffered by another bank. Borrowers Trapped More recently, however, the cap on the initial fee was lifted,
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