Credit card companies are not immune to the credit crisis, and one way they’re protecting themselves is by lowering credit limits wherever and whenever they can.
You might have a perfect payment history and still wake up to a $5,000 card limit that’s been reduced to $500.
One of the biggest victims in this whole economic meltdown — besides the millions who’ve lost their jobs — is the world’s financial liquidity reserve. That means there’s no credit anywhere because there’s no money to lend.
Better about finances? Your rates might get cut
Ironically, the people who are most likely to see their credit limits cut aren’t the people with the worst payment histories — it’s exactly the opposite.
People with no balances on their cards and a punctual payment history make much less money for the credit card company than do people with on-going balances and “helpful” late payment penalty charges. That kind of income, from both interest and ancillary fees, can help a credit card company’s profit margin.
The card holder who incurs no extra penalties and pays off their balance before it can accrue meaningful interest (meaningful for the credit card company, that is) is more likely to see their credit cut.
Other reasons your credit limit has been slashed
Of course, credit card companies cut credit limits for other reasons, not just as a reaction to frightening economic conditions. If you’ve gone over the line from infrequently late payer to chronic payment problem, you’re on the road to seeing your credit limit cut because the issuer is worried about getting their money back. Can’t argue with that logic, right?
What to do if your credit limit has been cut
If you’ve seen your credit limit cut for no good reason, don’t take it personally, and don’t assume it’s going to last forever. Credit card companies need and want to lend money — that’s what they do.
There’s a very good chance that when the dust settles from this current uncertainty you’ll see your limits go back up. Of course, if you want to see your credit limit go back up sooner, call the issuer and see what they can do for you. If your payment history isn’t the motivation behind your credit cut, you could talk your way back up to your old limit.