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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I have one account through GE Money Bank that went from a 19% interest rate to a 31% interest rate after ONE late payment (coinciding with receipt of emailed statements stopping). Needless to say, I disputed the balance and informed all 3 of the credit reporting agencies–resulting in the account being placed for collections with TWO different agencies (including Mann-Bracken). My credit limits with 2 other GE Money-managed stores (JC Penney and Lowe’s) were recently rolled back as well. I’ve informed both retailers that they’ve lost my business as a result.
Had a Wells Fargo Credit Card with $19,000 LOC that I just paid off in one lump sum. Next week they lowered by LOC to $300. I’ve never been late, always paid more than minimum and paid off totally every year or two. Our credit scores are 700. Makes no sense. Calling them tomorrow.
I have recently recieved 3 letter in the mail, 2 fromg GM lowering my limits from $8K and $7K to something like $3K. last night I received another letter from American Express lowering my limit from $7K to $3,500. The thing that bothers me the most is that the two cards w/ GM had a ZERO balance & they said they reviewed my credit & state I am a “risk” and my credit limits are too high. It just irrates me becuase my credit is something I rely on incase of an emergency & I am being penalyzed not because of my “credit” but because of the situation the economy is in. This isn’t about my credit limits, it’s that there are people out there who are not paying and these companies are losing tons of $$$. Therefore, we are the one’s suffering.
Just received my statement from HSBC (Polaris Star Card Account), I had over $11,000 credit limit, and owed slightly over $4,000 on the card. This statement showed I had $12.00 in available credit, called them and they had lowered my credit limit on 12/1/08. They said letters were sent out, which I have not seen. We had planned on taking advantage of a 4.99% offer (instead of 19%) and trade our old atv in for a new one, the dealer offered a higher tradein that what we owed. guess not now.
All I was told on the phone was they were doing this across the board, I closed the stupid account. This will hurt my credit, and I have good credit, no lates, not nothing bad.
2 weeks ago they had sent out a notice they were increasing the interest rate, now this.
What is even better, a friend of mine got his statement yesterday from HSBC/Polaris. He has one or two 30 day lates on his credit report, but they didn’t lower his credit limit!!
Liars!
Chase/WAMU.
I have another, Washington Mutual, received a letter last week they had cancelled my credit card account. I had it paid off and just kept it for emergencies, the reason they gave was ‘too many mortgages’
I would really like to know how this can be? This is another bank that needs to be ran out of business.
I had a $2000 limit on my Amex card with a zero balance. I used it yesterday for $27.00 for gas just to keep it active. Received an email last night that they have lowered the limit to $500.
Also happened with GE Money Bank with my Walmart card. They lowered me from $500 to $400 and that put me over my limit. With Discount Tire, I had a $1300 limit, with a $500 balance, they cut my limit to $600.
my husband and I have spotless credit and recently received a letter from our credit issuer “future trust”. The letter stated our credit limit was being lowered. Our respectable limit of 6500 went to 1400 overnight. I think this is a joke, for working bill paying couples. I do not understand why we are being punished for bad economic decisions made by irresponsible consumers.
In a way I am glad to see that I am not the only one this has happened to!
I just got a e-mail saying that my AMEX limit was reduced from 23,300 to 7,500 and that the explanation is in the mail. I called customer service and they told me that my experian credit report had something to do with the decision. I pulled the report and see no problems. My score is 765, which I am sure will be crap now given this reduction!
Been an AMEX customer since 1994. http://www.creditinfocenter.com/wordpress/wp-includes/images/smilies/icon_evil.gif
http://www.creditinfocenter.com/wordpress/wp-includes/images/smilies/icon_sad.gif
HSBC screwed me too. I’ve only had the card for about 8 months, but out of nowhere my limit was lowered and my interest rate was raised. I’ve always been on time (on all my debts) and paid well over the minimum amount due. I called to find out why and they told me that there were no notes in the system as to why it was lowered, but a letter was already in the mail explaining it. That letter never came. I’m so frustrated. I’m looking forward to paying this card off and being finished with these beastards!
surfing the web looking for any problems with HSBC, to my suprise found this website. I too am having problems with lowering credit limits. WOW! i just got off the phone with a “customer service rep” if thats what they call them now.
she rudely hung up on me when i said i believe what is happening is unethical. HSBC sent me a letter stateing that i used my card at high risk merchants??? and too many weekday authorazations??? i asked for a list of these merchants and said that i wasn’t aware that there was special rules for merchants. and that i’m sure Target, Best Buy and the indian casino I got cash from would love to know that HSBC thinks they are high risk.(i’m not a frivolous spender it was my 40th b-day! which the total amount was $400) she said well, the real reason is because you withdrew cash before your account was 6 mos. old. i said well i do have permission to withdraw cash, so if i was going to be punished then that should have been disclosed to me. she said we can increase or decrease limits any time we want. 
thats it! sounds like to me class action is exactly what needs to happen, and screw a bunch of economy problems. all i’m asking for is honesty, its what they expect from me. if the credit card company can’t pay their bills and credit card holders are going to have to carry the burden then we should be given that information.
Bank Of America- Hate them. Loayal customer 9 years to MBNA- (BOA took over), sent me a letter cutting my line in half. 1 st of all it was 3,000. I only had 1,300 on the card. I pay them on time every month & pay them off frequently. Their reason is… due to my debt w/ other cards. Citibank, gave me a line far higher for my business & I used it for my business!!! I say how Dare them!! Now I’m close to the limit on their card. This is a m*&%^^ …joke!
The only solution is to fire back. Do the following if you can:
1. Stop using the bank card that lowered your limit and do not inform them of your action
2. Pay off the remaining balance
3. Invest a huge sum of money with the bank that lowered your credit limit if possible.
4. Sit on your investment for a month or two and then call the bank and ask to speak with a credit manager. Tell him that you will be pulling out all your investment from the bank because you are not satisfied with their service. Explain why. Ask them that you’re only condition to do keep doing business with them is to have them increase your limit to where it was before. If don’t agree, just simply pull your investments.
Banks should not teach their customers how to manage their credit. Customers should teach their banks that they will also be hurt big time in the long term.
USAA did this to me !!!
Yes, the bank that promises to take good care of soldiers, etc. has done the exact same thing to me and I am in the same situation as the rest of you. I’ve had a relationship with them for over 16 years. They lied to me and told me my credit score was a 620, but when I pulled the ***exact*** same report, it was almost 800!!
Watch out for them! They are not the USAA that we are used to doing business with! They’re vultures and like all the rest of them, and when times get tight, they will turn on their own to survive.
Can anyone tell me if this is legal?
Am Express just lowered my limit on my credit card to less than the balance. I have never been late and always paid over the minimum amount. I have not used the card in over a year.
When I called them they gave me no real justification for doing this and were rude. I can’t wait to pay them off and they have lost a customer for life.
If they treat their good customers that way how on earth do the y treat their bad ones.
Am Express apparently my business does not mean anything to you, but you will soon find out how little you mean to me.
You know they say a customer can be your worst or best form of advertisement. I’m about to be your worst.
Amex customer for 16 years. Respected business for over 20 years.
Dec. 24, 2008 11,000 credit to $1000. $0 balance was on the card. Jan. 17,2009 lowered limits on two other business accounts.
In 16 years we have never made one late payment to them on any of their cards or any other credit card. Their explanation: excess lateness and high debt to credit ratio.
We will not be using their cards in the future nor take them for any business transaction. This us the way they “validate” you (per their television ad) for being a faithful client all these years.
At least we are not alone. They are certainly going to have more problems as they multiply people like us and how we feel… times a million clients. The hammer of bad karma will find its mark.
I just got my 3rd lowering your credit card limit from WaMu. One was AmEx, one was HSBC… Apparently this is the way of the world now… but since all of them are citing that high debt to credit ratio… and that it started with the AmEx dive, my only question is… aren’t THEY all in trouble and getting our tax money for the EXACT SAME thing? Ugh.
I pay excellent all the time and far more then the minium my credit cards limits are being reduced to what I owe them I don’t get this How they can give you something then take it away and make you look bad by having you maxed out when you were not even close to being maxed out Is this right
Well I have had no issues at all. I have few K limit on my AX. Frequently “using” 1/3 of the credit line. Paying more than minimum. And on time. I think its all about credit scores. Mine is 974. People write and complain with score of 700. Thats horrible credit!
No wonder they cut the limits.
Isn’t the highest possible credit score 850, super hero?
First of all to the guy with the 974 credit score, you are a idiot my friend. The highest possible credit score is 850, I have worked for a debt management company for years. I would bet my career on it.
Now my comment, I have a excellent payment history with HSBC. Last month I charged something for the first time in 3 years, my husband just got laid off, so I decided it was best to charge my new tires than pay cash. Save cash for emergency, I was so angry when I received a email stating my credit limit had been lowered to 75% of my available credit. How are we suppose to stimulate the economy. What a bunch of crap.