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2007
Will lenders lower limits on credit cards?
Monday September 29, 2008
In the US, bank and credit card lenders have begun lowering credit card limits, mainly to people with poor credit ratings. Another issue is that when people apply for credit cards, they're getting lower credit limits. Many people are becoming more reliant on credit cards, but applications are being given lower than expected credit limits, or are knocked back entirely.
Lower credit limits will lower the amount that consumers can spend. People wanting to apply for credit cards, especially those with a low credit rating, will find themselves limited in what they can purchase. Large purchases may be out of the question. If there are outstanding balances on other credit cards or there is a low credit rating on your credit file, the lower the credit limit will be.
While there have been no reports of this happening in Australia yet, it may happen if Australia falls into a recession or has financial troubles in the future. People may not get the higher credit limit they were hoping for. If you're concerned that your bank might do something similar due to your financial situation, here are some hints to help protect yourself from difficulties with your credit cards.
- Lower your debt and pay your bills on time. This also includes any other loans or debt you have. If you apply for credit cards with other lenders, they may be doubtful about your ability to repay your credit card if you have a large outstanding balance with another bank.
- Check out your credit file. If you have any outstanding bills that could be affects your credit score, settle them as soon as possible. Also, errors are rare, but they do happen. Check for any unfamiliar entries and report them.
- Check out letters from your bank. If there are any reminders of an overdue account, fix it up. If there are any changes made to your credit cards, the bank will notify you immediately.
- Use online banking to keep an eye on your accounts.
Even if these limitations aren't put into effect in Australia, it is still a good idea to maintain control over your credit cards and avoid excessive debt. Responsible use of credit cards will keep you out of debt, will have no negative effects on your credit rating, and allows you more freedom in your spending.
Having a lower credit card limits on your credit cards isn't necessarily a disadvantage. While you may be limited in how much you can spend, the plus side to this is that you are also limited in how much credit card debt you will rack up. If you're worried about your growing debt, this may help you manage your spending.
Compare credit cards today and find the best credit card with the right credit limit for you.
