Credit card companies cutting limits BELOW your balance!!
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  1. #1

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    Default Credit card companies cutting limits BELOW your balance!!

    Just another SNEAKY little trick up the Credit Card companies sleeves! How do you Blow your Credit Limit without even spending on your card? These guy are just PURE evil! And we the taxpayers are bailing them out WHY?


    If you haven't had the credit limit cut on your credit card recently, count yourself lucky. Risk-averse card issuers are getting slash happy. And while many cardholders gripe that such cuts slice razor-close to their balance amounts, for an unfortunate few the cuts go far deeper: below what they currently owe.

    Under different circumstances, David Chaplin-Loebell wouldn't have minded that American Express cut his unlimited credit line to just $5,000. Except that when AmEx reduced his line in October, he had an outstanding balance of $10,000. "I found out by having a business purchase declined," he says. Repeated calls to AmEx failed to yield an answer about why the cut was made. Chaplin-Loebell, who lives in Philadelphia, is now paying the balance under his regular card terms, and presumes the line will free up for new purchases once he's below the limit. "For now, they've essentially frozen the account," he says, leaving him to juggle business expenses on his personal cards. American Express did not respond to requests for comment.

    One possibility is that this is yet another attempt by card issuers to get consumers to close their accounts (while bringing in a little fee income in the short term), says Dennis Moroney, research director and senior analyst for consulting firm Tower Group. "I can't rationalize in my mind what other motivation there would be," he says.

    Paul Pensabene of Saratoga Springs, N.Y., received a statement from HSBC on Dec. 8 that said he had a $359.99 balance and remaining available credit of $8,640. But when he went online to pay the bill several days later, his online account showed that same balance put him over his newly-reduced credit line of $300. And that didn't include the $35 over-limit fee. Pensabene grappled with customer service until they agreed to remove the fee, and then paid the balance in full. "All I could think was, 'Good lord, what if this is happening to someone that couldn't pay their balance off in one shot?'" he says. "They'd end up in default with these fees piling up."

    HSBC declined to comment on individual cardholder accounts. Spokeswoman Cindy Savio says the issuer has tightened its credit standards based on the economy. "As we have previously stated, in an effort to reduce credit risk and refine strategies for our card business, we have tightened credit standards, reduced or canceled higher risk credit lines, and closed a number of inactive accounts," she says.

    While the fees, frozen accounts and default interest rates resulting from credit-line cuts can sting your finances, they can do some serious long-term damage to your credit score. Your credit utilization ratio -- the total amount of debt you owe in relation to the amount of credit available to you -- accounts for roughly 30% of your score. A credit line cut has the potential to decrease your score by 50 points or more if you don't have much other available credit, says Craig Watts, spokesman for FICO, the company that calculates and issues the credit score that most lenders use.

    Even cuts that are close to the balance have the potential to devastate if they're not caught quickly. Luckily for Carol Gressett of Decatur, Miss., she noticed the reduction in her Discover-branded Sam's Club card limit just days after it happened. The limit was cut to within $100 of her $3,000 balance. The official letter notifying her of the reduction arrived three weeks later. "We could easily have gone over if I hadn't been paying attention," she says.

    (A Discover spokesperson says GE Money issues the cards, and so is responsible for managing credit lines. GE Money did not respond to requests for comment.)

    Copyrighted, SmartMoney.com. All Rights Reserved.

    http://finance.yahoo.com/banking-bud...thout-Spending
    Last edited by Gardengal18; 03-17-2009 at 08:46 AM.

  2. #2
    Registered User jayneluvsmickey's Avatar
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    i sincerely hope that the actions of these companies wake people up to the dangers of carrying high credit card balances

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    Registered User Laurie in Bradenton's Avatar
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    We had this happen back at Christams time with our Dillard Acct. DH went into make a purchase and was declined. When he got home and we called we found out that our limit had gone from $1,500. to $1,000. Only problem we owed $1,200. To add insult to injury they charged an over the limit fee!!! When I called hopping mad I was told well just pay down the balance and we'll remove the charge. My response was "Remove me from your credit card department all together."
    Just the inspiration I needed to get rid of another card.

    Laurie in Bradenton

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    Amex and Sears Visa did that to me with no notice!!!!! Once I pay the Sears Visa I am done with it! I need to keep Amex for business reasons!

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    Registered User Greebo's Avatar
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    Quote Originally Posted by jayneluvsmickey View Post
    i sincerely hope that the actions of these companies wake people up to the dangers of carrying high credit card balances
    Corrected that for ya...

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    We defaulted on a cc payment a few months ago, and they reduced our credit limit from £10,000 to the amount owed at that time which was £2300. Thats fair enough, but not in the examples above.

    This is why I am paying back our overdraft and credit card as quick as I can. I was worried the bank would remove the overdraft at the annual review date which is July. We should be in credit before then.

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    Registered User Nishu's Avatar
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    They've been doing this for awhile. I don't agree with their business practices and I don't care if they do disclose it in the fine print. People don't realize how much the issuer can screw them over and the companies rely on that ignorance in order to make a profit. It's a dishonest industry and I'd like to see it tank.

    A few year ago there was a credit card company that was "losing" or holding checks for several days in order to charge late fees and over limit fees. I can't remember the name of it but I'm pretty sure they're out of business now.

    I don't know if this applies to every card but my citicard can be closed even if the balance is not paid off. When I tried to close the account they offered to lower the interest rate from something like 23 to 6 per cent. (They said I had a late payment. I doubt it but whatever.)

    My accounts are getting closed as soon as they're paid off if not before- I don't care what it does to my FICO.

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    Registered User Greebo's Avatar
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    It *is* a scummy business practice, but on the other hand, we the borrowers are the idiots who signed on the dotted line. When you swim with sharks, its pretty naive to complain when they bite off your legs.

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    Quote Originally Posted by Nishu View Post

    A few year ago there was a credit card company that was "losing" or holding checks for several days in order to charge late fees and over limit fees. I can't remember the name of it but I'm pretty sure they're out of business now.
    Cross Country (now known as Applied Cards Systems) and Providian were both doing this! Some of Cross Country's offices got raided by the FBI and the offices shut down a few years ago and all they did was just re-established themselves under another name (Applied Card Systems). (The owner, Roco, was VERY heavily Politically connected) Providian got bought out by Wamu who now got bought out by Chase.

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    Registered User mombottoo's Avatar
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    I haven't had any companies ever lower my limit to below what I owed, but recently Capital One did raise my interest rate to an ungodly amount after years & years of having a low rate...which doesn't make any sense since they rarely if ever get any interest off me in the first place.

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    Registered User Nishu's Avatar
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    o/t mombottoo but I love your avatar. I feel like that some days.

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    Registered User imagine's Avatar
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    This happened to us with our Discover card. They cut our credit to just above our balance. We did carry a little balance. We had never been late with a payment generally paid more than the min. Our balance was way less than our credit limit. Now we have 5 figure less credit available to us. We don't use the the Discover very often so the cut didn't run us over the limit.

    The note was a bit weird though, they made it sound like the credit limit cut was our fault. They said there is a possibility that our credit limit could be restored when our situation changes. Nothing has changed here. I think it must have been a standard form letter. Oh wait there was a change we were using the card less.
    Last edited by imagine; 03-17-2009 at 01:00 PM.

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    Registered User StaceyS's Avatar
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    Lowe's did this to me - I didn't know til I tried to buy a washing machine. Needless to say, I paid off the card, closed it and bought a washer elsewhere.

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    The lowering of credit card limits, coupled with the rise in interest rates, are the credit card companies ways of cutting back. They figure that if they offer less credit access to people, regardless of the cardholder's credit history, it'll help cut their losses and teach the irresponsible cardholders to be smarter with their cards.

    I feel for those of you who have been really avid about paying on your cards and such. However, these things happen. My best advice is to pay off the cards, cancel the accounts and either pay in cash or get a check card.

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    Registered User imagine's Avatar
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    The lower credit limit didn't hurt us in anyway. It just felt like a slap on the wrist even though we didn't do anything bad.
    KWIM

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