Approximately 20 percent of card holders in America have experienced limit reductions since recent credit card reformation.
This despite perfect credit records; but there are things you can do should you desire restoration.
According to a recent survey by the Consumer Action, a San Francisco-based consumer advocacy group, nearly one in five credit card holders in the United States have had their credit limits reduced, even with spotless payment histories.
A similar Bankrate survey showed that only 6 percent of those who responded reported their credit limits being slashed, which is notable because it is up from 1 percent the previous year. Of course, some financial analysts prognosticate that consumer credit contraction is about to reach its tipping point.
Meredith Whitney, a banking analyst at Oppenheimer & Co, for example, thinks that credit card companies will slash approximately $2 trillion or more over the next couple of years. Linda Sherry, a spokeswoman for Consumer Action also says,
Our surveys have been showing this as a practice (lowering credit card limits) for at least three years. I think it is stepping up somewhat in this economy.
If this is something you may be facing, you have a few options for preventing or restoring your previous terms:
The first thing you can do is to complain diplomatically. Simply call the card company and ask them for their reasons and ask them to restore the previous limit. Curtis Arnold, founder of Cardratings says
The technique of complaining in this current environment is particularly effective because the card industry has a black eye right now.
He estimates that it costs approximately $300 in marketing to replace a single lost cardholder, so companies would prefer to keep you. Thus, call the card company and ask to speak directly with a manager. Of course, keep your cool and speak clearly and politely.
The second thing you can do is to actually start looking for another card and transfer your balance to get a competitive rate. Linda Sherry, of Consumer Action, says
If you have excellent credit, you may be able to get a balance transfer deal to another credit card with a higher limit.
This is a particularly effective strategy because it may not only restore your previous credit limit but it can often put you in position to pay as little as 0% interest for up to 18 months. Watch those balance transfer fees, though.
Another option you might have is to search for a credit card outside of the big banking system. The recent crisis has actually helped some smaller companies find a foothold because of innovative marketing or a fearless attempt to offer competitive products.
Tim Kolk, managing partner of Brookwood Capital, a credit card consulting firm, says Bankrate’s credit card database is an effective place to begin looking for a new credit card that will better meet your needs. In fact, he stated,
I think someone who is having trouble with a major national credit card issuer would be well served to go to their local banks and credit unions.
Curtin Arnold, the founder of Cardratings says, finally,
The bottom line is, credit card companies are tracking our spending habits, our debts, etc. Consumers don’t need to freak out about that, but we do need to proactively manage our credit more than ever.
Indeed, this the best way to ensure that you are doing everything you can to get the most out of your credit experience. Monitor your credit report at least once a year and correct any inaccuracies. Make your payments on time and, if possible, always pay off your balance in full.
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