Credit card issuers are on a rampage – cutting credit limits, increasing interest rates, and closing inactive credit card accounts. Though you don’t have much control over rising interest rates and decreased credit limits, you can keep your credit cards open by using them every once in awhile.
Why are creditors closing inactive cards?
Credit card companies don’t make any money on accounts that aren’t used. In fact, it costs them money. During this credit crisis, it’s risky for credit card companies to have unused credit cards on their books, because it’s hard to predict what you’re going to do with the credit card. You could decide to max out the card one day and never pay back the balance. In this case, it’s cheaper for the credit card company to just let you go.
Why should I care?
Having a credit card closed could lower your credit score. First, part of your credit score calculation considers the age of your credit – an older credit history is better. If your oldest credit card gets closed, it won’t be factored into your credit score. Your credit will seem younger, and your credit score will drop.
Another part of your credit score measures your level of debt by comparing your total balances to your total credit limits. The higher your credit card balances in relation to your credit limits, the lower your credit score will be. Having a credit card closed raises your ratio of balances to credit limits – your credit utilization – and lowers your credit score.
What can I do?
If your credit card has recently been closed, call your credit card issuer and request to have your account reopened. It helps if you’ve been a long-time, timely-paying customer.
Keep your credit card open by using it periodically and paying the balance off when the billing statement comes. By doing this, you’re letting your credit card know that you still appreciate and use the credit card.
Showing posts with label credit card limit reduction. Show all posts
Showing posts with label credit card limit reduction. Show all posts
Monday, December 29, 2008
Saturday, November 22, 2008
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.
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.
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