Archive for the ‘credit card limits’ Category

You Could be Over-Limit on Your Credit Card – Even if You Haven’t Used it!

Wednesday, March 18th, 2009

You already know that credit card companies are lowering credit card limits right and left – and we’ve warned you that before you go shopping you need to go on line and make sure you really do have the available credit that you think you have.

But now, credit card companies are pulling an even dirtier trick!

According to an article provided to Yahoo finance by SmartMoney.com, some card issuers are now slashing credit card limits to less than your outstanding balance.

You read that right. Many consumers have had their available credit cut to a mere $2 or $3 over their outstanding balance – making them over-limit when the interest was added at the end of the month. Smart consumers called immediately and asked to have the over-limit fee removed, and were successful in doing so, as long as they hurried to make a payment and get the balance low enough to avoid triggering another over-limit fee the next month.

That tactic was outrageous enough, but at least the new credit limit was within range so that consumers could comfortably pay enough to get away from over-limit fees.

But now consumers are reporting cuts that could put some in a position of not being able to bring their balance low enough to avoid future over-limit fees.

The SmartMoney article quotes Paul Pensabene of New York – he received a statement from HSBC on December 8 showing that he had a credit line of $9,000 and owed $359.99 – so his available credit was $8,640. Luckily, he didn’t go shopping, because when he went on line a few days later to pay his bill, he found that his credit line had been reduced to $300 and he had been charged an over-limit fee of $35.

Another woman reported that she had caught the reduction to within $100 of her $3,000 balance on a Discover card when she went on line just days after it had happened. The letter notifying her of the change didn’t arrive until 3 weeks later.

This practice has the potential to bring thousands, if not millions of dollars in over-limit fees to the card issuers who are using it. Consumers who are unaware of the changes may innocently use their cards to charge purchases, while not having any idea that they are exceeding a credit limit. After all, if your statement says you have $8,000 in available credit, you really wouldn’t worry about charging a tank of gas.

Because the new regulations are taking effect in July 2010 and legislation currently in congress could move the time up by a year, card issuers are pulling every trick out of their hats to increase their revenues before these tactics are banned.

The advice for consumers: Be careful. Check every statement, read every piece of mail, and go on line to check available credit each and every time you use your card. If your credit limit is suddenly slashed from $8,000 to $300 and you make an expensive purchase, you could find yourself scrambling for the cash to pay for it – or face over-limit fees each and every month until you do.

My question: When this crisis is over and credit card issuers once again want our business, will we remember the names of the companies who hurried to fleece us while they had the chance? I hope so.

Author:Marte Cliff
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news

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Reduce your debt to available credit ASAP

Saturday, December 27th, 2008

The rule of thumb has been that you should keep your credit card debt ratio down to 30% of your available credit in order to maintain the highest credit scores. Now that 65% of all lenders have tightened up their requirements, credit experts are recommending a limit of 10%.

This credit crunch is expected to get even tighter, as reported in the July Senior Loan Officer Opinion Survey on Bank Lending Practices.

Maintaining a 10% ceiling will become harder to do, as many credit card issuers are lowering credit limits “just because” they want to. Few people read the fine print in their credit card agreements, but most do contain clauses that let your creditors reduce your limits and raise your interest any time they choose to do so.

Since part of your FICO score depends upon the ratio of debt to available credit, when card issuers reduce your credit limit, your scores will drop. In addition, when they increase your interest rates, paying down your balance becomes more difficult.

Work on it now, while your interest rate is still low, and your limit still high. If you wait, your credit score could become the next victim of their arbitrary decisions.

In spite of our government urging us to spend in order to “stimulate the economy,” it’s time now to cut back on spending and increase repayment. And many Americans have done just that.

When the Economic Stimulus Checks were mailed this year people were expected to rush out and buy things. In fact, people on assistance programs were required to either “spend it or lose it.” But surveys showed that only 14% of all Americans did that. The rest of us either paid bills or put it into savings – showing that we do have some good sense.

Still, most families and individuals can find ways to cut back a bit more and pay down those credit cards.

The recently lowered gasoline prices should help a great deal! After many months of double and triple gas costs, we’ve gotten used to the expense. Anyone who did a lot of driving should take that “extra” money and apply it to credit card debt.

You may not feel concerned about this, because you have no need for credit at the moment. But should you suddenly need to borrow money for an emergency, need to relocate to a home in a new community, or want a new car, you’ll realize how important your credit score is to your financial options.

Lenders are demanding higher FICO scores, charging premiums to grant loans, and generally making it tougher for average citizens to get the money they need – when they need it.

Your defense is to beef up your Credit Score to the highest possible level. The first step is to get a copy of your credit report so you know how you stand. The second is to get that credit card debt paid down as quickly as possible.

CreditScoreQuick.com

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