It’s not just the housing market who is tightening the reigns of their credit lending…the current trend among credit card companies is to reduce credit limits. You know the credit card companies generally change the rules of the game anytime after sending you your credit card. Typical sneaky tricks include increasing interest rates, add rules of arbitration, increasing late fees – all of which is perfectly legal. Be honest now, do you read the entire text of your credit card statements and updates each time when they come in the mail? I admit that I don’t.
The latest trick seems to be lowering the credit limits on your cards, apparently in an effort to reduce the risk to the card companies. If you have a $10,000 limit, a credit card company may want to reduce their risk to $5000, cutting your credit line in half. They will not decrease your credit limits, though, in such a way that would put you over the limit. For example, using the $10,000 credit limit above, if you are using $6000 of that line, they would not reduce your credit limit to $5000. They might reduce it to $6000, though which would put you at 100% of your credit line utilization.
Increasing your credit line utilization is one of the fastest ways (other than big negative marks like bankruptcies or judgments) to decrease your credit score. To maintain high credit scores, the overall guideline in credit card utilization is no more than 33% (preferably 25%, though). Can you see how a sudden 50% reduction in available credit can play havoc with the average consumers’ score?
Naturally, the credit card companies are defending their moves by saying they are acting in the best interests of the consumer. According to a MSNBC article:
“Business conditions continue to weaken in the U.S. and so far this month we have seen credit indicators deteriorate beyond our expectations,” American Express’ CEO Kenneth Chenault said in a statement.
That’s why card companies including Washington Mutual, HSBC and Wells Fargo are lowering their credit limits, according to data from the consulting firm Institutional Risk Analytics.
One of the oft-ignored, but critical responsibility of the consumer in carrying credit cards is to at least make an effort to know what the current terms and conditions for their credit. The easiest way to know if your credit line has been lowered? It’s not in the fine print – the basic credit card statement lists the credit limit prominently, often right next to the current balance and payment due. Next month, when you receive your credit card statement, make sure you take a minute or two to take note of your credit line. Should you find your limit lowered, call your credit card company and see if you can convince them to increase it back to its old limits. This shouldn’t be a problem if you’ve been a good customer.
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My husband just got hit with the lowering of limit on his HSBC card. I work in the financial industry and there are regulations that say any adverse action requires 30 days notice. This did not happen. It’s one thing if you have been slow in payment to reduce the limit but when you have paid on time and more than minimum amount, a 30 day notice should have been given so that we don’t try and use our cards and then get denied. It’s time to contact our representatives and senators about this and let them know we don’t like banks like this being “bailed out”
How about this for some jacked up $#!@ from HSBC. I have a credit score in the 740 range. Good payer on everything I do/own. I get this email message late in the day which comes into my Berry saying I’ve come within $1000 of my limit. Knowing full well I probably have only a couple hundred bucks charged on this card with a limit of $6000, my thoughts are someone has jacked my card and is charging it up. I go into panic mode and call their 800#. Takes me 45 minutes to get through their messed up phone menu only to finally get a hold of some kid who tells me I’ve been cut back to a limit so low that I couldn’t buy a set of tires for my car. No warning. He tells me I should be getting a letter of explanation soon. SOON? HSBC, you listening? Thanks for the near heart attack and for treating a good customer like this. Sorry for the rant, I’m off to fuel the economy using a different card from now on.
I just had the same thing happen to me with HSBC. I got an email saying that I was within $1000 of my limit; I knew that couldn’t be correct. So I looked up my account; my limit had been lowered. I called the 800 number and was told that it was a “business decision” to lower their risk of loss. I’ve never been late on payments, was nowhere close to my limit, and always paid more than the minimum. This is infuriating and scary.
Exactly the same thing happened to me yesterday. HSBC yanked over $9300 in credit form me which will undoubtly hurt my credit rating. That is what angers me. I have made a call to my governor and have just gotten off the phone with the White House comment line. (202-456-1414).
I feel the law should be changed that a persons credit rating should not be affected when the banks are the ones who have messed up. These banks are destroying peoples credit who do not deserve it. This is horrably wrong and something needs to be done about it.
The White House also told me to contact the Treasury Department (202-622-2000) and to be sure to tell them the names of the banks that are doing this because this is completely against what these “bailouts” were about.
I am sorry for everyone that this has happened to.
This is just an update on my previous post. I received a phone call back from the Governor’s office and was told to contact my local legislative representatives and she gave me both the phone numbers as well.
She also informed me that the new legislative session was just about to began, so it was an excellent time to bring this to their attention.
I just do not want these banks ruining my credit and hope that something can be done. Apparently your local legislator is where we should all begin to demand a change to how our credit rating is determined.
What I have noticed and the card companies “GE Money bank” has all but admitted to, is that your credit cards are now basically front loaded cards. If you have a $1000 credit limit and you pay $500 on that limit, your new limit will be $500. This is the amount you paid thus this is your limit in essence the banks are limiting their risk by lowering your limits to reflect the amount they think you will pay each month. The trick is to find a number that you will pay based on your credit score so that their exposure is equal to the amount of money you will pay. If you are making minimum payments each month your limits will descrease shortly after you make a payment. Eventually if you have a Lowes credit card the only thing you will be able to purchase is a nice low end screw driver at a rate of 31%. In closing the banks are playing the win game from here on in. Stand up and be counted cut the credit card companies off, close their biggest line of credit “YOU”! Save your own money and pay cash for what you need. I did this for 9 1/2 years. I watched my credit score soar to over 730. Lower your exposure to banks and raise your credit score through personal savings. Hit them were it hurts.
This just happened to me, they lowered my available credit from 3800 to 300, I called and complained and cancelled the card, I always pay my full balance at the end of every month which is over 300. They couldn’t care less! They asked was I sure I wanted to cancel, didn’t I need the 300 for emergencies? I laughed and said any emergency that I would need 300 bucks for I’ll pay in cash!
My credit just got cut in half… It’s barely enough to cover my normal monthly charges. I’ve never been late with any of my payments, and I have an excellent credit score. They are refusing to raise it back to the original limit.
Bank of America just did this to me. They lowered my limit from 9000 to 5000. I was never late on a payment, and I haven’t had a balance on that card in nearly a year. When I called them they said it was because I didn’t seem to need that much of limit on my card. I asked why they were doing this since I always paid my bill early or on time, and they said, “don’t take it personal”. I told them I was going to shred the card and the lady said I might want to think about that since it’s a “money back” card. I said I wasn’t taking it personal because I know the credit card industry is doing this to lots of people who pay their bills on time. I also told her that I didn’t to think about whether to keep the card or not, if this is the thanks I get for being a good customer then I don’t want to do business with a company like this. When I hung up the phone I shredded the card.
I will be calling the Treasury Dept.
If you are a GM card holder, please be warned. My husband has a credit score of 750. He has no late charges on his credit report and has had credit for over 20 years. He owes GM card about 4400.00 on a credit line of $110000.00 and two other store cards under $1000.00 each. Since January his company has been cutting jobs and hours, so I started only paying the minimum due on the GM card until things get better. Today, we receive a notice that his credit limit has been dropped to $4700.00 because of him making only minimum payments. I don’t think it is fair that they can do this, when they are the ones that decided how much minimum payment they wanted. If they thought he should have given them more, why didn’t they bill him more. It isn’t like they aren’t loving the interest they make on people only paying the minimum payments. The government should not bail these companies out! They have ripped people out of tons of money, and yet they continue to come out smelling like a rose.
I live in Canada, and I guess the banks are following the American banks lead. I just found out today that my limit was sliced in half. No warning, no nothing! I found out by being declined. I was worried someone stole my card number, so I called in to find out that they lowered my interest. I asked why and she said, your credit is probably bad, which is absolutely Not true! I told her I have excellent credit and to look it up right then, but she refused. She was very rude about it too. I have been with this bank, Presidents Choice Financial for over 10 years, never missing a payment, and this is how I’m treated! Unbelievable! I’m going to see about a credit union, or at least shop around for something better, and who’ll respect the consumer!
Ooops, ** lowered my credit limit I meant to say
I just had one of my credit cards say they were raising my rate from 7% to 14%. You know what I said? “Cancel my card.”
American Express just sent an email that my A/E corporate gold card now has a spending limit of 1,500. There was previously no spending limit, and my bill balance was usually between 3-5 thousand per month for business charges, to be paid in full each month. Now, once the card balance gets to 1,500, no further charges will be approved.
I have had this card for 16 years with no problems. We use this card for business purposes and 2 other employees also have a business card off the main card. The main card holder is responsible for all charges. We usually have a balance of around 3,000 that was paid in full each month. We also get membership miles on the charges, so we would pay our monthly utilities, phone bills, insurance, etc., on the card, then pay the card off at the end of the month instead of writing individual checks to suppliers. We did this to give our business an extra 30 days of buying/paying time, and also for the points that can be transferred to airlines for miles.
Although A/E likes to tout that they have no spending limits, that is not true. Even in the past, your spending limit was usually a thousand above what you normally spend in a month, based over the previous year of charging. So in essence, A/E cut our spending limit in half, as we normally do 3,000 per month.
I did some research and see that A/E is cutting limits based on crazy things. Like where you shop! If a lot of card holders are late payers and shop at the places you do, or frequent places that A/E feels are indicative that you might default (like dollar stores and warehouse stores) they are cutting your limit. Also, if the bank that has your mortgage has had a lot of defaults, they think you might be next. Also, your geographical location. I have never heard of anything so ridiculous on how they establish spending limits. So, if you are frugal, and like to save money and shop at stores that are deep discounters, they feel you are a greater credit risk! I SAVE money by purchasing at warehouse clubs, I don’t shop there because I can’t pay my bills. So, I guess you need to shop at Boutiques and stay at the Ritz to keep your credit limit high!
Empower yourselves. Canceling your credit card may have an unexpected effect on your credit score. Do research and learn, it helped me so much. If you are able, pay off your bill in full each month and get back at the credit card companies. They don’t make money without your debt!
You bet it has. The worse part was I had used my card to pay a deposit for a trip for a group. They had paid me cash, I paid down my card to pay the deposit on the card. Two days later I went to pay the deposit only to see they lowered my limit by the $900 I had paid. So now I no longer had the the $900 and could not make the payment for the deposit. I am about to take a trip, and need the cc for the rental car etc, I am totally paranoid to pay it down only to get 1300 miles from home and find out my card has been declined. This situation really stinks, and we the consumer are left to scratch our heads while the cc companies ruin our lives!
I was issued a Belk card by GE Moneybank last November. The card had a $750 limit. I have used the card several times and payed the card off several times, all payments were on time and way over minimum. Was planning on doing all my Christmas shopping again at Belk this year. However, I received a letter in the mail today October 8, 2010 stating that my limit has been reduced to $100 , seriously what kind of game are they playing. It makes me feel like I have done something wrong. Sorry, Belk don’t guess you will receive anymore sales from me. Guess I will have to shop other places and use my Visa, too aggravated to shop Belk. Going to contact Customer Service tomorrow or Monday and cancel card. I don’t want the debt to limit affecting my credit.GRRRRRR
Hello Everyone now I know this is much BIGGER than I imagined. In Sept of 2008 my fico was 748 and climbng. Suddenly got my monthly AmEx statement with my limit lowered from 30,000 to a ridiculous 2800 (no letter with 30 days notice nothing). After 45 minutes on the phone with now Risk Dept instead of regular customer service. since when did we all become risk (since the creditor lowered the limits). there was about 3500 of 30000 use on card. BoA, AmEx, HSBC and GE, etc all got bail-outs. They were “shored up” to preserve the US economics from crashing completely. What about keeping good, regular, higher than minimum payers ‘”hored up”.
ooops….What about keeping good, regular, higher than minimum payers ‘”shored up”.