Chicago Bankruptcy Attorneys Warn Credit Card Companies Are Lowering Limits for Consumers
One day credit card companies are stuffing your mailbox full of offers - the next, they're taking your credit away.
Creditors are cutting credit limits - and not just for high-risk customers, according to an article in BusinessWeek.
It's been reported that 16% of customers had their limits reduced between April and October 2008. Of those, approximately 11% were low-risk customers with high credit scores. These are the people with steady income who pay their bills on time, don't bounce checks and don't take out cash advances. So what are they doing that creditors don't like? They're carrying a balance.
Until as recently as last year, creditors actually preferred customers who carried a balance. A balance meant more interest and more fees, i.e. more money for them. But with rates of credit card defaults reportedly reaching 10% or more, these customers are now viewed as a threat - even if they are paying their bills on time and otherwise following the rules. See, creditors worry that if a balance-carrying client loses her job, the company will be stuck with her debt. So they're taking no chances.
What does that mean for you? First, you need to start keeping track of any changes to your accounts. Do your homework - read the fine print. If your limit has been reduced and you don't realize it, you might exceed it and get dinged with a fee.
Second, start paying attention to your debt-to-limit ratio. When creditors lower your limit, your ratio - the amount of debt you carry as a percentage of your limit - will go up. Credit bureaus want to see you have a low ratio - usually 30% or less. Let's say you have three credit cards with a total limit of $10,000. You would want to carry a balance of less than $3,000 for a good credit score. If you can't get your ratio to under 30%, at least try to lower it - you might be able to improve your score.
If you're making minimum payments - or even if you're paying more than the minimum, but you're carrying debt - it might be time to re-evaluate your finances. See if you can pay down some or all of that debt to reduce your debt-limit ratio and lower your risk factor. Stay vigilant about any changes to your credit cards or your credit report. You're owed a free report once a year - just go to AnnualCreditReport.com.
If you just can't seem to get your debt under control, don't wait until creditors make your life miserable - get help now! Bankruptcy might be just the ticket to a fresh financial start. To find out for free, why not sign up for a one-on-one debt analysis with a DebtStoppers attorney in Chicago or Atlanta? You've got nothing to lose - except, of course, your debt.