Card Issuers Cut Card Limits_ Lowering Credit Scores

Bloomberg is out with a story that talks about card issuers lowering credit limits, which can often lead to lower credit scores. Chase, Citibank, American Express, they’re all slashing limits. People who carry balances from month to month — which is about half of the card-carrying population — are most at risk when limits get slashed and interest rates get raised. From the story:About 45 percent of U.S. banks reduced credit limits for new or existing credit-card customers in the fourth quarter of 2008, according to a Federal Reserve January survey of senior loan officers. Financial institutions may slash $2 trillion in credit- card lines in the next 18 months, Meredith Whitney, a former Oppenheimer & Co. analyst, wrote in a Nov. 30 report.“You’re no longer immune if you have good credit,” said Curtis Arnold, the founder of CardRatings.com, a Web site that reviews credit cards. “The issuers hold the cards, literally.”Credit-card issuers such as New York-based American Express, Citigroup Inc. and JPMorgan Chase & Co. have cut credit limits to guard against risk and prevent delinquency and charge- off rates from increasing, said Arnold, who is based in Little Rock, Arkansas. Charge-offs are loans the banks don’t expect to be repaid and were 7.1 percent on average in January compared with 4.6 percent a year earlier, according to data compiled by Bloomberg. If you want to be immune from this stuff, here’s what you do. Don’t carry balances. Nothing wrong with using credit cards as long as you’re not paying interest every month. If you’re not carrying a balance, annual percentage rates will be irrelevant to you. Even if your limits get cut, your score shouldn’t take much of a hit as long as you’re not carrying balances. If you are carrying a balance now, work on getting it paid down. Read the rest of the story here (link).Related Article:Chasing The Balance — What It Is And Why It SucksDid You Suffer A Citibank Rate Jack? You May Be Able To Do Something About It