Major bank failures and the resulting recent economic slowdown has impacted credit card companies and account holders in major ways. Many credit card holders are reporting drastic changes to their accounts, everything from cancellation for a zero balance or non-use to credit limits being dramatically dropped overnight. Is this fair? What can you do to combat this if it’s happened to you?
You have to realize that you are not alone in this situation. Credit card companies are raising interest rates and trimming down limits across the board. They are drowning in debt (like many of us) and reducing spending limits, hoping this will help them become more financially sound. Once the credit markets loosen up (some experts say as soon as 2010), you may find that your spending limits won’t be so restricted. But what can you do until then?
Call Your Credit Card Company Immediately
If you get a statement in the mail telling you that your credit limit has been dramatically reduced, get on the phone right away. Be sure to check your e-mail as well.
State Your Case
Astronomical charges, fees and reduced spending limits can actually hurt your credit score. If you used to have a $5,000 limit and now have a $500 limit, a maxed-out account can reduce your credit score by dozens of points. And every point on your FICO score matters these days.
You may be able to strike a deal that allows you to keep some or all of your credit limit if you cancel the card once it expires. For some, this may be a better option than losing buying power now. For others, canceling the card is not an option, so you may consider looking for a new card altogether.
Apply for a New Account
A new credit card may be a better way to go if you can find a reasonable offer. You can take advantage of introductory APRs as well as incentive programs (rewards, gift cards, travel miles, etc.). Keep in mind that since the credit markets are so tight, the deals out there simply aren’t as sweet as they were in times of economic splendor. So, if a deal sounds too good to be true, it probably warrants more research.
Help Is On The Way (Eventually)
The federal government is working on legislation that will prevent credit card companies from cutting off credit, hiking up rates and reducing credit lines. However, these rules won’t likely be enacted until the middle of 2010. Until then, you should work on keeping your credit card balances low and consider working under a restricted budget to meet your lowered credit limits.
—For more ways to save, spend, invest and borrow, visit MainStreet.com.