Out of balance

As the Christmas shopping season gathers momentum, a congressional committee last week drew attention to an industry that stands to gain a lot from the annual surge in spending: credit-card lenders.

Some of their profit, argued members of the Senate Permanent Subcommittee on Investigations, is unfair and comes at the expense of consumers who play by the rules. "If you shop with a credit card, as most Americans do, dangers lurk that few consumers realize could damage their financial future," said Sen. Carl Levin, D-Mich.

The hearing shed light on a particular industry practice that makes critics seethe: the often sudden and sharp raising of interest rates, even for consumers who make payments on time. Senate investigators found that some lenders raise rates based on fluctuating credit scores, or simply to pass on borrowing costs to consumers.

What many Americans don't realize is that when a person applies for a new credit card-such as from a retailer to obtain a special discount on a purchase-his credit score drops at least temporarily. This happens regardless of his history of making payments on time, and can result in higher interest rates on other credit cards.

Some credit-card executives defend that practice, arguing that a borrower who takes on more credit increases the risk he poses to lenders. "Not considering other debts is like taking the batteries out of a smoke detector," said Roger C. Hochshild, Discover's president and chief operating officer, at the hearing.

Still, Levin and other legislators want to impose regulations on credit-card interest rates, a move that the executives at the hearing said would have the unintended result of limiting the amount of credit available to many consumers.

They may be right, but the hearing implicitly highlighted a valuable lesson for American shoppers, who currently carry about $900 billion in credit-card debt: The one and perhaps only way to keep from being gouged on interest rates is to live within your means and pay your balance in full every month.

Balance Sheet

HOUSING: The nation's housing market will continue to slump until 2009, predicted a report from Moody's Economy.com last week. The report said prices on the national level would fall 13 percent from their peaks before stabilizing in 2009 and rebounding in 2010, with at least 80 metropolitan areas seeing double-digit price drops. Report co-authors Mark Zandi and Celia Chen blame an excess of unsold inventory for the lingering problems. "This is the most severe housing recession since the post--World War II period," Zandi told the Reuters news service. The luxury home builder Toll Brothers, meanwhile, reported its first quarterly loss in over 20 years. The company said it lost $81.8 million during its fourth fiscal quarter. "By many measures," said chairman Robert Toll in a statement, "Fiscal 2007 was the most challenging of the 40 years that Toll Brothers has been in business."

JOBS: The Labor Department last week reported that the number of workers seeking unemployment benefits fell by 15,000 during the week ending Nov. 24 to reach 338,000. Still, the four-week average for jobless claims stood at its highest level since Hurricane Katrina hit in 2005. Analysts attributed the late November drop to increased hiring for the holiday season.