Tag: credit limit

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Credit Lines Shrinkage

It looks like credit card companies are cracking down hard on unused credit. As I had blogged about previously, Citi had began charging an annual fee for inactivity. I actually called in this past weekend and inquired about switching to a different account with no fees. Unfortunately the customer service rep told me that it didn’t really matter which account I switched to, I’d be getting a similar letter soon afterwards telling me about the inactivity fee. I ended up closing that account. I believe I had about $6,000 in credit limit on that card.

Today I received a letter from American Express stating:

We’re writing today because we noticed that you’ve only been using a small portion of your available credit limit. To more closely match your spending history, we have adjusted the credit limit on your account to $6,500.00 The cash advance limit is $1,3000.00. If this new credit limit is not sufficient for your business, please call us at 1-800-660-2454 between the hours of 8:00am and midnight Eastern Time, Monday to Friday.

I believe my previous credit limit on this card was either $10k or $11k, so basically reducing it in half. Technically, I only put about $100/mo on this card, and mostly for gasoline purchases since it gives me 3% back instantly.

Banks must be hurting.

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High Risk Credit Card Holders Logic?

Not sure if you caught my recent entry on how Consumerist Banned Me From Commenting, but Consumerist just posted their The Consumerist Comments Code, which I’m not sure if I have a factor in causing or not.

The first point they make is: No junk comments:

Your comment should be a meaningful response to the issue raised in the post. Objections to an editor’s headlines or writing style should be emailed directly to the post’s author. Verboten: “Why is this on Consumerist?“, “tldr”, “Why did they even shop there in the first place?”, “This is a non-issue”, “Slow news day?” “Pwnd” “Yawn”, “First”, “People still ______” (use dialup, eat fast food, breathe air, and so forth), “Old news”, “lol”, “This is why I don’t shop there,” etc.

My comments aren’t exactly “Why is this on Consumerist?”. Usually I provide one or more reasons why it should not be on Consumerist.

What happens if I break these rules?

You may be banned. We might warn you in the comments. We also might not. If you ignore a warning, you will probably be banned. If you feel your ban is unwarranted, email your appeal to moderator@consumerist.com and we’ll see if we can work it out.

I find it quite useless to try to warn users inside the comment section. Often times I would post a comment and never return to see the story again. I wonder why they don’t just email the user giving him the warning.

Anyway, Consumerist recently posted this article: Risk-Based Pricing Is A Myth and I have long wondered a very similar question.

How exactly does increasing interest rates or charging late fees help you in getting money from someone who’s already late paying the bill? Logically, I’d try to make it easier for them so they actually can pay you.

As noted in the article, late fees and high interests rates don’t mitigate risk, they just make credit card companies filthy rich. I like the idea of how if you’re late on a payment or if your financial situation has changed (loss a job), decreasing your credit limit sounds like a good way to mitigate risk. If someone can’t ever make enough money to utilize their full credit line, I don’t see how increasing interest rates is going to make it work any better.

Though I do have to say, thanks to all you “high-risk” credit card holders, “low-risk” credit card users like myself can reap the benefit of rewards and cash back. For that, I thank you.