Banks cut credit to consumers | The Frugalista

Banks cut credit to consumers

by frugalista on October 2, 2008

Credit_card_alternative
Because of the financial crisis, banks are getting stingy with credit.  If you go on a charging spree, the bank may lower your card limit without warning. It doesn’t matter if you are a diligent consumer. The banks have limited cash and are scared to take risks.

From the CNN article:

… the percentage of people
who are delinquent on their credit card payments rose 12% in the second quarter from the same period a year ago, according to credit reporting agency TransUnion LLC.

So
to mitigate rising risk and compensate for less credit overall, issuers
are scaling back consumer credit lines – sometimes by more than 50%,
according to the American Bankers Association (ABA), a bank industry
trade group.

In fact, 62% of credit card issuers have cut back
the lines of credit they make available to consumers, according to a
recent report by Javelin Strategy & Research, which advises the
financial services industry.

Check your credit card limits to make sure that they haven’t changed. Your debt-to-limit ratio has a big impact on your credit score. If you carry a balance, the lower your limit, the worse your ratio. Meh

Do you think it’s right for banks to issue a credit limit, then change it without warning? Is it just a preventative measure of the credit card issuers?

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