ANALYSIS-US credit mess chips away at consumer financing

By Emily Kaiser

WASHINGTON, Dec 7 (Reuters) - From electronics stores to car dealerships, U.S. lenders are subtly scaling back easy financing terms as tightening consumer credit conditions spread beyond the housing market.

With signs that spending is already sagging under the weight of the housing downturn and steep food and energy prices, retailers are reluctant to take away too many of the popular promotions for fear of turning off shoppers, retail and credit analysts said. That means you can still buy a big plasma television with zero-interest financing, but this holiday season you may have less time to pay it off before interest payments kick in.

Automakers are still advertising no-interest loans, yet the average interest rate on new car sales has crept up since housing-related worries began roiling financial markets this summer.

Anecdotal evidence suggests credit card issuers are also showing more restraint, approving applications by the thousands but tweaking some of the fine-print fees or policies.

"There's definitely been some tightening. Most of the changes we've seen have been fairly subtle," said Curtis Arnold, consumer advocate and founder of CardRatings.com, which tracks the credit card industry.

"We've heard more complaints about credit lines being decreased. We've been seeing the length of introductory

(offers) diminish. Instead of giving 12-month offers at zero percent interest, we're seeing nine or six months. The fees on balance transfer offers have gone up," he said.

Several major credit card issuers contacted by Reuters declined to comment, saying information about their financing terms was proprietary.

CONSUMERS HOLD BACK

Consumer spending is always closely watched because it accounts for the lion's share of U.S. economic activity, but with the housing downturn and credit market strains threatening to stall economic growth, investors are paying even more attention to this year's holiday shopping season.

Retailers are looking to strike the right balance between financing offers that entice buyers, and generosity that unnerves banks worried about mounting consumer debt and rising delinquencies.

The ratio of debt to personal income hit a record high of 138 percent in the third quarter of 2007, Merrill Lynch analyst David Rosenberg said.

Banks have already taken a $50 billion hit from bad debts tied primarily to the subprime mortgage mess, and that has left many lenders more cautious about a wide range of financing.

Early data suggests shoppers are feeling cautious, too.