Credit Card Series: Just in time for your holiday shopping! Reduced credit limits whether you were naughty or nice!
In an attempt to help manage their bottom line, credit card providers are reducing the credit limits on some of their charge cards. By making such changes the affect on a consumer is two fold. The immediate affect would be that cardholders have less access to money and may tap out their credit limit more quickly. When that occurs the debt to available credit ratio increases. The higher the ratio, the greater chance of a negative affect on ones credits score. Additionally, those whose rates are lowered may not realize it at the time of a large purchase, go over their limit and get hit by large fees.
All the credit problems are directly linked to the mortgage crises affecting our nation. Banks have invested huge amount of money into the mortgage industry and are no getting very little return for investments. At this point to try to keep their finances intact, credit card companies want to work with a lower risk demographic to help avoid any possible defaults in the future. This strategy will help reduce the banks’ financial risks while allowing them to generate the most money on a smaller yet more controlled audience.
According to the Federal Reserve’s October survey those with extremely high credit scores experienced a 20% cut in their limits while those with a less then spotless credit history experienced a 60% cut in their credit limits. To make sure these reductions don’t take you by surprise make sure to review all the paperwork your credit card issues. If there is a cut in your limit, you can always call your card provider and see if they are willing to change it back.