There have been many cases where banks have cut limits on credit cards and overdrafts on the savings accounts. Here are a few reasons why :
Of course every one is blaming the ECONOMIC DOWNTIME. Banks have cut credit limits to reduce there risk in this recession.While this maybe true, you may want to take a look at your own credit payment history to figure out the real reason why YOUR personal credit limit has been cut. Your PAYMENT HISTORY plays a major role in the credit limit you are given. A few late payments on overdrafts and credit cards, which were overlooked before, aren't over looked now. You are now looked at as a potential risk because credit cards are loans with no assets as collateral or what we call an unsecured loan. HAVING TOO MANY OF THESE UNSECURED LOANS or credit cards also makes you a potential risk to the bank. If more then 40% of your salary is going towards loans you will raise the red flag for your bank. KEEPING UP WITH ALL YOUR PAYMENTS is essential now-a-days to keeping your bank happy. Now banks , more then ever, are checking to see if you are keeping up with your payments at other banks or financial institutions. Banks are given portfolio reviews of you on a monthly basis. A portfolio review gives information about a credit card holders relationship with multiple lenders. Its a tool the bank uses to see exactly how many loans you have, if there are any defaults, and if there are defaults how much you owe and how many days you've owed it. The LACK OF USE of your credit card will also trigger the bank to cut your credit card limits. The bank will assume you don't need this much credit and if money is not being used the bank can not make interest on it. Also make sure you CHECK YOUR CREDIT REPORT ON A MONTHLY BASIS. Make sure you know your credit score and check for mistakes on your credit report. With fraud and identity theft being on the rise its good to know whats going on with your credit. You can check your credit report at http://tracking.strongerads.com/SH1j
You would think that with the state of our economy and all that bailout money the banks would be somewhat lenient towards our interest rates and penalty fees. But sadly this is not the case. Credit Card consumers who do not even default on there credit card payments are complaining that even though they continue to keep a good credit score and pay off there Credit card bills every month there interest rates are still going up as high as 27%. Banks are finding new ways to maximize profits by increasing penalty fees and raising interest rates. But there is a catch - Although banks do like credit card consumers who do pay off there debt in a timely manner they also know that issuing credit lines to people who cant pay them back is also profitable. GET THIS: Between '03 – 07 the top seven banks that issue credit cards packaged all there debt into securities and sold it to investors. This is not good for the consumer. This is giving the banks a reason to raise rates so that most people do default and they can just cash out by selling the debt to investors. They pass along some of the risk to these investors and at the same time keep the profits from the accounts with raised fees and interest. Banks claim they use a special software to compute what they charge regarding fees and penalties BUT yet At the end of this year 09' banks will have written off about 10% (90+Billion) of credit card debt which is the highest write off ever. Why do you think they are writing off this debt?? Maybe because its being sold? The facts show that banks are lending too much credit too fast.
This is exactly what they did with the bad mortgages and look at the economy now. First it was the mortgages and next will be credit cards. So people please be aware of banks offering you credit cards before you even apply. I don't think you would want to deal with companies who want you to be in debt. I will leave you with this thought:
" Credit card consumers with a lower income who keep a balance on an account can be more profitable for banks than other borrowers."
This blog has been designed for the people by the people. Behind every Credit Card is a bank with a profit motive. With the economy declining i feel we've become victim to this because of miseducation or certain ignorances towards the facts. Im not saying that we shouldnt have credit cards and good credit reports but i want us to enlighten each other with our own experiences. There isnt much you can learn and benefit from the people who are actually taking the money from you. Consumers should learn from other consumers. Education comes from the experience of others not just text books and infomercials. I hope that this site can help us become better consumers so it can have a positive impact on our own lives , the U.S. economy, and the Global Economy as a whole.
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