CHICAGO -- Savvy consumers like Barbara Hoffman helped bring Wall Street's wrath down on the credit-card industry this week.
All it took was a pair of scissors and a bit of financial common sense.
Inspired by the rosy U.S. economy, Hoffman carved up four credit cards this year, refinanced her debts and paid off the high-interest accounts.
"Why should I support the credit card companies when I should be looking out for my own finances?" Hoffman, a Chicago jewelry saleswoman, said.
Millions of other Americans are thinking and acting similarly, paying off their credit-card bills more swiftly than ever -- often with the aid of lower borrowing rates from refinancing a mortgage. Others have become accustomed to switching balances every few months to competitors that offer low introductory "teaser" rates for the first few months of service.
That spells trouble for the big banks that dominate the credit companies and count on heavy interest payments to drive profits. The resulting shock waves already have some questioning whether those card issuers will be less generous in offering super-low introductory rates.
Chicago-based Bank One Corp.'s stock lost 23 percent of its value on Wednesday after it warned its annual earnings will fall at least $530 million short of expectations because of slowing growth in its First USA credit card business. First USA is the second-largest issuer of credit cards after Citibank, the giant banking unit of Citigroup.
Bank One executives acknowledged First USA's problems came as existing customers defected to rivals offering better interest rates and after some cardholders were alienated by the elimination of First USA's one-day grace period for late payments.
But consumer moves to shop around for debt may bring repercussions. Credit-card issuers are likely to respond by bumping up their lowest introductory rates, said analyst Robert McKinley, president of credit card research firm CardWeb.com.
"When the nation's No. 2 card issuer says "We surrender -- we're not going to play this (super-low interest rate) game any more,' it undoubtedly means a retrenchment in the industry," McKinley said Friday.
But spokesmen for major card issuers say it's too early to say whether rates will no longer be as low on the introductory offerings that pour into consumers' mailboxes each week.
"It's going to be a few months before we see a reaction," said Linda Echard, president of Independent Community Bankers of America, which represents 2,000 smaller banks that issue credit cards.
Hoffman, the jewelry saleswoman, chided credit-card issuers for their enticements.
"It's so easy to get swept up by their wonderful offers," she said. "It's so easy to spend, and they make it seem so easy to pay."
Analysts say that strategy is likely to be re-examined as Wall Street pummels the stock of credit issuers.
Companies are learning the rates battle may win new business, but the way to keep it and make a profit is more attentiveness to customers once they're on board, McKinley said.
"It's just a matter of fighting over the same customers, and you can't grow that way," he said.
Still, the news isn't all bad for credit-card issuers. Recent government reports have revealed Americans are going deeper into debt and saving even less.
The Federal Reserve said this month that consumers' credit outstanding advanced at a 2.5 percent annual rate in June to $1.347 trillion. Demand for revolving credit, primarily credit cards, rose at an annual rate of 8.6 percent.
On Friday, a Commerce Department report said consumer spending had climbed 0.4 percent in July, leaving the nation's savings rate near an all-time low -- minus 1.4 percent of after-tax income.
And increases in mortgage interest rates this summer also may slow or end the nationwide wave of refinancing that has whittled away huge chunks of debt.
When bank rates retreated last year, many Americans refinanced their home mortgages at an astonishing total of $750 billion. With some of that money, many paid off debt from credit cards that had far higher interest rates.
Any downturn of the economy could lead to increased reliance on credit cards to make ends meet, resulting in a rise in debt problems.
Moody's Investors Service says bad debt, or credit card charge-offs for unpaid bills, has fallen for 16 straight months. That may indicate that consumers are getting better at managing their finances.
The Hoffman family is among those debt-sensitive consumers who are finding cheaper borrowing rates and increasingly paying off credit card bills as they come due each month.
"People will go to the 'nth' degree to save a dollar and then have 20 percent interest on their credit cards," Rebecca Hoffman, 28, Barbara's daughter, said. "What's the point?"