Money Now! USA

Watch Out for Credit Limit Cuts 11-22-2008 Money Now! USA

The credit crisis has many credit card issuers slashing their cardholders’ credit limits. Back in June 2008, both Washington Mutual and Wells Fargo cut credit limits by up to 10%. Recently, American Express customers have seen credit limits slashed by thousands of dollars. These credit limit cuts couldn’t have come at a worse time, with holiday spending ramping up.


Lower credit limits are dangerous for your credit score. You see, 30% of your credit score considers your credit utilization – your credit card balances compared to your credit limit. The closer your balance gets to your credit limit, the lower your credit score will be. You could be doing well at keeping your balances low until the credit card issuer comes along and drops your limit, making it look like you’ve maxed out your credit card when you really haven’t.
If you don’t know your credit limit has been decreased, you could mistakenly go over. Credit card issuers don’t stop you from exceeding your credit limit. They just charge you a fee when you do it. They’ll also increase your interest rate. Even worse, your other credit card issuers might do the same.


Before you swipe your credit card, make a quick call to customer service to check your credit limit and available credit. Your credit limit could be decreased at any time without your knowledge, even if you have a good credit score and a positive payment history. Credit card issuers aren’t being picky with credit limit cuts – everyone’s fair game.
Checking your balance before making a purchase helps make sure you don’t go over your credit limit and receive a hefty over-the-limit fee.
If your credit card issuer notifies you that your credit limit is being decreased, it’s best to pay down your credit card balance to keep your credit score from being hurt.