When Going Gets Tough, Tough Get More Credit

The following post first appeared on Minyanville.

The only thing more insatiable than American consumers' desire for more credit is lenders' ability to dream up new ways to extend it.

Online auctioneer eBay (EBAY) is teaming up with GE Money (GE) to offer instant credit access to customers using its PayPal payment solution. According to Dow Jones, GE Money CEO Margaret Keane said, "eBay buyers will find deferred payments to be an extremely easy way to buy what they really want now and plan their payments in a way that best fits their budgets." Where exactly these new purchases will fit into those overstretched budgets isn't entirely clear.

In a nod to personal responsibility, eBay expects the new program will encourage buyers to bid on items they otherwise couldn't afford. The company said credit approval can happen in as little as 30 seconds and should lead to "increased sales and higher selling prices." GE will reportedly retain the risk if payments aren't made.

eBay isn't the only retail company getting in on the credit extension act. Retailers like Macy's (M), Kohls (KSS) and Gap (GPS) all offer their own credit cards to facilitate more shopping. But recently, as consumers have struggled to keep up with monthly payments, these once-profitable lending units have been jettisoned. JP Morgan (JPM) now owns Kohls' and Circuit City's (CC) card businesses. Just last week the bank made a deal to buy a piece of Target's (TGT) floundering credit division.

Although the move may boost eBay's sales, it won't help America's debt-dependent economy move toward more sustainable levels of consumption. Having tapped out home equity lines, credit cards and to some degree retirement accounts, consumers now have another way to spend money they don't have.


Position in TGT