Lowering the Credit-Card Limits

Posted on September 29, 2008
Filed Under Credit Card News, Credit Rating | 3 Comments

It’s not just your portfolio that may be shrinking during these turbulent times. The spending limit on your credit card may be heading south as well.

Credit-card issuers have been decreasing credit limits in the wake of the subprime meltdown. Folks with good credit scores and solid credit histories are now getting caught in the fray.

“Most banks are cutting their credit limits,” says Carol Kaplan, spokeswoman for the American Bankers Association. “They’re doing it to everyone.”

Smaller credit lines spell trouble for consumers on several fronts. Lower credit limits shrink consumers’ ability to spend. And should an emergency arise, consumers will have less credit to cover those costs. Consumers also could trigger penalties for going over a newly lower limit.

Here are five ways you can protect yourself:

1 Lower your card debt. Carrying credit-card debt is never good, but it’s really not a good idea these days. Bigger balances make consumers prime targets for credit-card companies looking to reduce credit lines, since the banks worry that you may not be able to pay your tab.

2 Watch the mail. When credit-card issuers lower credit limits, they must notify you. Typically, that will be done by mail (unless you’ve agreed to online-only notification). You should also review your monthly statement for changes, including a lower credit limit, interest-rate spikes and new penalties.

3 Check your report. Credit-card issuers review consumers’ credit reports for red flags, like late payments to other credit cards, a sudden buildup of debt or high credit-utilization rates. Check your credit report for free online at AnnualCreditReport.com. If it includes any errors, report them to the three major credit bureaus, Equifax, Experian and TransUnion.

4 Get online alerts. Ask your credit-card issuers if they offer online alerts that notify cardholders when they’re nearing their limit.

5 Shop around. If your credit limit gets slashed, don’t cancel your credit card. That will decrease your credit score. Instead, shop around for more attractive credit-card offers.

by AnnaMaria Andriotis

Comments

3 Responses to “Lowering the Credit-Card Limits”

  1. Xsan on March 3rd, 2009 3:02 PM

    Thank for you for the information, it was very interesting.

  2. Bill Jenkins on April 14th, 2009 5:56 PM

    I had a Menards “Big Card” store credit card that was operated by HSBC. It had a $1,000 credit limit and I rarely purchased items and never carried a balance over.

    So I check online to see that my credit was lowered from $1,000 to $200. Why bother? I closed the account without thinking twice. $200 credit is meaningless as any charges on it would surely increase a debt/credit limit ratio THROUGH THE ROOF. What really could I purchase for $200 anyway? I certainly could never take advantage of Menards “interest free for a year” offering on appliances and whatnot.

    HSBC are crooks, and I’m going to ensure Menards pays the price for dealing with that crooked company by never shopping there again. But I’m just one guy so I’m sure they could care less.

    I hope HSBC becomes the next one to DIE.

    Anyway, I did not get any notice of a credit limit reduction. It seems to me the only way of avoiding credit limit reduction at this time is to actually keep your credit cards charged to the max until these companies stop this nonsense.

  3. Bernie on June 3rd, 2009 7:05 PM

    I had the same problem, but with walmart. My limit was $500.00, decreased to $200.00. I paid on my card twice a month. I found out by making purchases at walmart, and my card wouldn’t go through, now that is embarassing.