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Credit Limits Slashed Top News about Credit Cards!
2008-11-06 05:08:26

Credit Providers Cut Lending Limits

A high spending limit is one of the most sought-after features, when it comes to new cards. For big spenders and small business owners, the amount of lending limit is extremely important. But to find deals offering high spending limits is not that easy, especially now that lending companies and banks tighten their standards. Judging by the recent study, 62% of lenders tend to reduce spending limits to existing clients, and only 8% of lending institutions increase credit lines. Most U.S. Banks and providers have been tightening their standards in response to the unfavorable economic environment. Read more and learn how to protect your credit from these changes!

Smaller lending limits spell various troubles for consumers. If you are a good payer with excellent payment records, you are likely to have a high spending limit. In case your spending limit got slashed, you will have to reconsider your budget and pull in your belt. First off, you will have to spend less and keep your account balances low if you want to avoid over-the-limit penalty fees. Secondly, you can hardly cover unexpected costs if your emergency card gets squeezed.

Major U.S. lending providers make no secret of the fact that they control risk and make the adjustments they deem appropriate in regard of the current economic situation. The practices like interest rate hikes and spending limit cuts are not new. But banks and companies increasingly take a more aggressive look at holders' accounts posing great risk, and even borrowers with high scores can experience troubles caused by spending limit cuts.

According to the experts, above-mentioned measures are quite appropriate. Banks try to recoup their losses and reduce potential risks. That's why some borrowers see their spending limits slashed and unused accounts closed. Banks admit the fact that they can close or reduce credit limits on accounts with zero balances, especially those ones that have been inactive for a long period of time. The question is, how can we manage credit changes and protect ourselves from potential financial troubles?

If you are a transactor, a holder who pays off account balances in full each month, you'd better leave everything as it is. In today's economic environment, changing your spending habits is not the best idea.

Atypical payment behavior, like using your card for taking out cash advances or reducing the amount of your monthly payment could be a red flag to lenders. And they can make adjustments and change the terms of your account. Needless to say, these changes could make things even worse.

To be in the know of any changes, check your monthly statements carefully. Look for change in terms notices and contact your issuer in case you find some negative adjustment. If you are a good and trustworthy customer, it makes sense to prove that you're a good risk. The chances are your lenders will meet you halfway and maintain the terms of your account.

If you don't want your old accounts to be cancelled, use them once in a while. Charge something insignificant but make sure you can easily pay it off. By doing so, you can keep your old accounts active and they will not be canceled by your issuer.

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