Credit Limit Cut down without a Two Weeks Note

Credit companies are still trying to get back on track after the credit crunch that affected the companies' financial standing pretty severely. The country economy slowdown makes it even more difficult for credit providers to make it up for the losses.

So, creditors seek for alternative ways to recover their financial welfare. Customer abuse has become a pretty common practice for credit card issuers. Aggressive anti-delinquency policies, unfair fees and interest rates hikes and other predatory credit card practices are widespread tactics used by lenders. Cutting card holders' credit limits without a notification is another method of risk-reducing policies performed by credit companies.

Just recently some of the credit consumers with rewards credit cards have suffered from a new bill. Under this bill rewards card holders lost their credit rewards after credit companies pulled back their rewards programs. This was just another attempt on the lenders' part to regain their profits or at least stay away from incurring greater losses.

The bill involved the decrease of transaction or interchange fees (merchant fees). But the thing is that those fees were, so to say, a source of rewards generation. And the cut-down of these credit card fees triggered the depletion of rewards offered to customers.

However, this innovation was just a mosquito bite as compared to the new tactic. Cutting credit limits turned out to be a strong shake for card holders spending habits and their financial freedom. This change affected all consumer categories, from those with excellent credit to bad credit card holders.

Say you are through with your dinner at some restaurant, a waiter brought your check, you give him your plastic to pay for your meal and after the waiter swipes your plastic, you hear the words: "I am sorry, your credit card is denied". But you are 100% sure that you have stainless credit history, and your credit line allows you to buy at least a home theatre. This might be just the case. Your creditor could reduce your credit card limit without a two weeks note, as they should have done it by law.

In case you try to charge more money on your credit card than your credit limit allows you to, you will be charged an over-the-limit fee. But that is not the worst what will happen. This will also damage your credit. The thing is that the so-called "credit utilization" is one of the basic components of your credit score. This "credit utilization" is the ratio of your actual and potential debt. As long as it does not exceed 30%, your credit score doesn't get hurt, and even goes up. But once you go beyond this figure by using greater part of your credit line, your credit score drops.

However, there is no such law that forbids creditors to reduce or increase their clients' credit limits. But lenders are bound by the law to notify a customer about any unscheduled alterations to card holder's credit card agreement terms and conditions.

It is pretty obvious that a bad credit owner has more chances to become a victim of this risk anti-exposure measure. If you own one of Visa, MasterCard or American Express cards, you are heads and ears in debts, you have unsteady income or live in the area that got affected by the mortgage crisis, keep an eye on your credit card details, terms and conditions. Probably, more than ever.

But there are companies that show mercy to their credit card users and even slightly increase their credit lines. But of course only when it comes to people with good or excellent credit. these companies are Chase, Bank of America and Citigroup.