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Has Your Bank Slashed Your Credit Card Limit?
Tuesday, June 24th, 2008You probably pay your credit card balances each month (if not, you should). But, have you checked your limits lately? There’s been a huge shakeup recently as card issuers are starting to feel the mounting pains of increasing delinquencies.
Traditionally, you could expect that as long as you kept paying your bills on time and maintained your account in good standing, your credit line would remain stable, if not increase. That’s beginning to change.
A lot of people are opening their statements and discovering their card limits have been slashed to a fraction of what they once were. The reasons may startle you.
New Ways of Assessing Risk
Rather than waiting for customers to default on their accounts, card issuers are being proactive in identifying potential problems. They’re looking more closely at how and where customers are using their cards. Instead of relying solely upon their credit scores and payment history to judge their ability and likelihood to pay their bills on time, some card issuers are now digging into customer buying behavior, where they live, and what they do for a living when deciding how much credit to extend.
According to Business Week, many customers of CompuCredit have discovered that using their credit card to pay for a marriage counselor could result in having their limit cut in half. Bars and pool halls are on CompuCredit’s radar, too.
The Wall Street Journal has reported that major card issuers like J.P. Morgan Chase, Bank of America and Discover have also begun lowering some customers’ limits. While they are reluctant to divulge how they are judging their customers’ creditworthiness, at least one pattern has emerged: anyone that can be associated with the housing meltdown is being put under the microscope. For example, anyone living in areas hardest hit by the housing downturn, or working in industries associated with housing, such as construction and finance, could be seeing their credit limits cut.
What to do?
For those who run a small business that depends on credit, this latest news underscores the importance of not relying on a single credit card issuer. If you can diversify your cards, you’ll decrease the chance that an unexpected credit line decrease will cripple your business.
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June 24th, 2008 at 5:47 pm
My wife and I had our limits slashed by Chase recently and they did it without any warning. They dropped us a letter by US mail. On one CC that we jointly use for purchase, and pay in full on due date, they brought down the limit to within $200 of the outstanding balance.
But I caught it almost immediately and called Chase. They asked me to fax proof of income and bank statements to confirm savings. Then, they immediately restored the limits to original levels.
June 25th, 2008 at 10:58 am
American Express has closed my two credit cards… one with credit line of 60K and another one for 8K. They have requested financial documents that do not exist. Income statements from my broker (I don’t have any), and also one from my accountant (I also don’t have any). When called and explained that the documents they are asking for do not exist and I am not able to provide them, they responded that they cannot do anything about it and my accounts needs to remain closed. Any thoughts? I don’t really know how to proceed. My credit history is clear of any delinquencies, no late payments, no unpaid bills, and all cards are paid within 30days.
June 25th, 2008 at 12:23 pm
@Jarek
Something in Amex’s system must have triggered a review of your account. At this point if you can’t provide the requested documents, you’re probably stuck. If you really want to keep those cards, did you offer to disclose your tax returns instead?
If they’ve already closed your accounts, you have fewer options. You can try asking how to get the accounts reinstated or wait a period of time and reapply. However, it’s nearly certain that they will require income/asset documentation from you even if you try reapplying later. Amex just reported that delinquencies are increasing more than expected, so they’re likely to be eyeing accounts even more closely now. Since you have large lines of credit, they’re going to want to see that you have the income to support them.
June 26th, 2008 at 7:24 pm
Hi, I had a similar situation recently. Chase has just closed all my credit cards, and the reasons are: “Number of bankcard accts” and “Too many requests for/reviews of credit”. Does anyone have similar situation? I am not sure what to do in such a case. All my cards are paid on time (all balance within first month), I was never late, all bills paid on time, my score is between 720-760 (depending on a credit bureau). I do not really have control over who is reviewing my account. Does anyone have any idea what I should do in order to restore my accounts? Thanks.
July 2nd, 2008 at 7:56 am
My suggestion is to avoid Chase anything credit card wise. They are the worst company as far as credit cards for charges. They are the hardest for disputes especially when it against them. I tried to get them to remove the annual fee when I wanted to close the account but they refused. Said I had to pay it because it was due before I wanted to cancel. I get promotions all the time that I have requested to stop, but I still get them. Just avoid CHASE.
July 3rd, 2008 at 11:12 am
Many of my clients are seeing their accounts closed. Financial hardships are also being caused by the increase in fees and interest rates!
July 3rd, 2008 at 11:17 am
[...] is being reported by numerous sources, credit card companies are slashing the credit limits of their card holders. [...]
August 18th, 2008 at 7:30 am
[...] off losses that will surely come when the new Federal Reserve fair practices guidelines kick in, banks are starting to quietly lower credit limits on cards held by even their best customers. This immediately impacts credit scores: A major part of a [...]
December 15th, 2008 at 7:54 am
[...] now, news of credit card issuers cutting credit limits, hiking interest rates and closing inactive accounts is commonplace and has reached the [...]
December 30th, 2008 at 10:28 am
Chase just moveed my credit line from 16,000 to 700.00 on one of my cards. Only Owed 360.00. Had always paid on time for over 8 years.
Payed them off and canceled the card.
The Joke is now on them. After all how can a business operate with a 700.00 credit line.
Had also just got a Marrot Reward CC offer from Chase. Applied and received a whopping credit line of 500.00. Called and told them I would not even bother to activate the card. After all a hotel stay would cost that for a 4 days.
So now down to one only Chase Card. Good thing I have a few other companies to fall back on ..
This is not the first Credit Card Company I payed off
Advanta moved my interest rate from 16% up to 32%
Had just made a 4000.00 payment. Balance not that high. Told them it was unacceptable. I paid it off and told them I would not be using card anymore unless they moved interest rate back down. Still waiting.
My true opinion is that they should let a few of these banks go bankrupt and out of business. The hell with bailing them out. They crunch Numbers with a machine and then make these moves on peoples lives and businesses.
By the way I live in Central Florida in one of the worst areas for the Housing Fiascal. They should have done a little more homework and they would see that I pay only 700.0 a month on a property that was valued at 300,000. and stil woudl bring closed to that since I have an extra acres that a another house could be built on. Plus I have 2 rentable mother and law apartments.
THEY ARE ALL IDIOTS if they are using the area I live in against me. Let me know when the class action suit comes along because of these housing market choices they are making.
I want their blood.
By the way I make my money outside of the market I live in.
I wish more of us could do this
(pay them off)
and crunch their earnings Big Time
I say, Audrey
April 24th, 2009 at 7:28 am
I had a 15.000 limit on one of my chase cards and was a top scorer….and for my efforts,just had this slashed by 2/3….greatly affecting my score. The reason given was that I didn’t spend enough.
I will close all my chase cards after making my last payment and getting my $50.00 reward.
In this economy we shouldn’t be using credit cards for anything. And until there’s a much more humane system built on something other than sheer greed, I will never consider using them again.
September 6th, 2009 at 10:08 pm
I had an AMEX Blue that was 22k one day and 1k the next. No late payments ever! Cancelled it.
Discover did the same thing, 13k to 6k and 9.99% to variable that is now 25%. I was a discover customer for 8 years and never late and only carried a balance a couple of times. And they did this change while I was traveling. My card was declined and when I called I was over the limit…the new limit. I called but the people I had to speak to (about the limit decrease) work Mon to Fri and I was calling on a Sat. Thank goodness I had my spare Citibank card. When I told Discover to cancel my account they practically thanked me.
When I got home a letter from Citibank was in the mail. The letter thanked me for being a loyal customer and asked how they could reward me for being a loyal customer. Guess who I am using now for all my purchases.
Side note – Credit score is 750, no issues with credit, collections etc. Living in southern Cal.
March 7th, 2010 at 11:02 pm
I have a Macy’s Visa card with a 4,000 credit limit. Never late on payments. Always paid way above the minimum. Last payment I made was $500! Last month, it was stated in my bill that they increased my credit limit to $5,000. The past couple of days my card started getting denied. I thought that the there must be some error. I called Macy’s Visa and I was told that they lowered my credit limit down to whatever my balance was. I asked them why wasn’t I notified about this when they actually just gave me a credit limit increase? I was told that they are basing this on “internal/external” credit history. This is all bogus. If they increased my credit limit, it meant that they looked at my credit history and found enough cause to give me an increase. So what happened between then and now? By the way, I was told that they gave me notice and it is still in the mail. Thanks!
April 24th, 2010 at 5:58 pm
I have a WaMu/Chase credit card with a $5,000.00 limit and currently hold a zero balance. I received a letter from Chase stating that because I wasn’t using the credit card they deemed it necessary to reduce my credit limit to $500.00. I agree with the posting earlier (#11 averratoU) and will make sure to cut up and cancel this account and hopefully never have to worry about debt from credit card companies. I am currently debt-free; including my home and vehicles. I have no use for Chase or it’s bank.
June 2nd, 2010 at 1:06 pm
I had two credit cards with Chase. Never went over the limit, never being late. Always paid over the minimum payment. About six month ago, they cut my lines bu aboyt two thirds. When I tried to find out why and called the customer service the ancwer was “this is our money; we do what we want”. I stopped using the cards and decided to pay the off and close. Recently, when checking my accounts online, I found out that both credit lines were cut again WITHOUT ANY NOTIFICATION. I called the banc immediatly and closed both accounts. CHASE credit servicesdoes not deserve loyal customers. They loose customers, as the result they wiil loose their money. DO NOT HAVE BUSINES WITH CHSAE CREDIT SERVICES.
June 6th, 2010 at 8:56 pm
I am sorry for all people inconvenienced by these practices. One question though – WHY would anyone use Amex (American Express) ????? They treat so many people badly. My partner had a card with them. Never again!!! Paid it off and washed our hands of them. I told him it was a bad company to deal with too. Just had CIBC slash my credit line limit. Guess who is no longer in the running next mortgage renewal time? A little notice would have been nice. This is just insulting and very annoying. It is atypical behaviour on the part of this bank and they had better have a good explanation. I intend to politely phone, ask for this explanation, thank them for their time and govern my financial choices in the future accordingly.