Credit card limit reduction and interest increase

[tmm99]

I was watching a local news last night and one report was about credit card companies raising the interest rate on existing credit card balance as well as overdraft, and lowering the credit card limit (also on the existing cards).

I haven't seen this happen to me yet.

Anybody notice any change yet?

tmm

 

[Walt34]

Yes, DW got a notice a couple of months ago that the limit on her cc was reduced by more than half. I expected to get one too (same bank, same limit) but haven't so far. We rarely put more than a couple hundred $$ on either so it doesn't matter much to us, since we've never come close to the limits. We'd probably faint if we did!

We both think a five-figure cc limit was a bit silly anyway. I can see it perhaps for someone who does extensive business travel but otherwise who in their right mind would pay 18+% for a loan?

 

[W2R]

Credit card companies probably hate me. I don't drink the Kool-Aid - - don't have a credit card. No interest rate! No limits!

I do have a government credit card that I must use for work travel. I can't charge anything unauthorized to it and never have. The credit limit is nearly the moon, I guess, and we haven't been notified of any reduction. Can't wait until I can ER and get rid of it.

 

[tmm99]

I pay off my credit card balance every month, but I charge everything to one card (to get points) so my balance goes up to anywhere from $1500 to $2000 a month. My limit is much more than that (like Walt said, a rather silly number - way too high in my opinion) so I have no worries so far, but I was surprised to hear that if you were spending say $5000 a month (and paying it off every month) and the credit card limit was lowered below $5000 (and you didn't know it because you usually shred those ad looking letters from your credit card companies without reading them), you would end up paying finance charge for over-drafting.

They also said the interest rate increase may vary from +2% to +20%. That sounded ridiculous to me (especially +20%). I feel for the people in this economy where they may have to rely on their credit cards for a short time to get by, without knowing all these changes and get a huge surprise after the holidays.

If your credit card limit is lowered, does that change your FICO score? I read somewhere that FICO score is partly determined by your available credit?

tmm

 

[Khan]

I really don't know my interest rates as I haven't paid interest in ~15 years.

My limits haven't changed.

My first year retired, the credit limit on one card was above my 'income'.

 

[kyounge1956]

Credit card companies probably hate me. I don't drink the Kool-Aid - - don't have a credit card. No interest rate! No limits!

I do have a government credit card that I must use for work travel. I can't charge anything unauthorized to it and never have. The credit limit is nearly the moon, I guess, and we haven't been notified of any reduction. Can't wait until I can ER and get rid of it.

I don't have a credit card either but I was very surprised a few years ago to discover that there is a limit on my debit card. I tried to pay for a four-figure car repair with it, and my card was rejected even though I knew I had more than enough money in my checking account to cover the bill. When I called my bank to find out what was going on, they told me about the limit. It's an anti-theft measure; at least in theory if someone else gets hold of your card they can't clean out your bank account. I told them why I had tried to put such a large amount on the card, they released the limit (for that purchase), I paid for the repair and was on my way.

 

[Bestwifeever]

I can't imagine not having a credit card. We always use it for car repairs (and for car rentals--the platinum visas have the collision loss waiver thingee as a free benefit) because if there's a problem they will investigate it. One of ours also doubles the warranty period for new purchases. And the points for what that's worth. And we felt more comfortable when our kids were in school that they had our card for books, emergencies, flights home, etc.

And then of course there's that whole money making credit card no interest cash advance arbitrage venture that retired 29-year-olds use

Now that we're retired with no verifiable source of income for the next two years, I'm expecting our limits to be lowered--the three we use regularly (and pay off every month) have a combined limit of $80,000, and the card that keeps getting sent to us that we never use is another $30,000.

 

[Rustward]

In 2004 Frontline did a show entitled The Secret History of the Credit Card.

"The average American family today carries eight credit cards. Credit card debt and personal bankruptcies are now at an all time high. With no legal limit on the amount of interest or fees that can be charged, credit cards have become the most profitable sector of the American banking industry: more than $30 billion in profits last year alone. FRONTLINE and The New York Times examine how the credit card industry became so pervasive, so lucrative, and so politically powerful."

You can watch here FRONTLINE: reports: secret history of the credit card | PBS Runs 60 minutes.

The card companies have a name for those of us who pay our balances in full every month.

 

[Rustward]

. . . the platinum visas have the collision loss waiver thingee as a free benefit . . .

That coverage is secondary to any other coverage you may have, at least in our state. We were rear-ended at the first stop sign out of the Avis lot a few years ago.

 

[Bestwifeever]

That coverage is secondary to any other coverage you may have, at least in our state. We were rear-ended at the first stop sign out of the Avis lot a few years ago.

I saw this happen in front of me a few years ago--I bet that happens a lot. Ouch.

I know it's our own insurance first and the CLD waiver second, but through Hertz the cld was $10 a day. Not a big reason to carry a credit card (I don't think we've ever paid for the waiver, thinking our own insurance would be enough), but it's there already with the credit card.

If someone would have a heloc for emergencies, I don't know why they wouldn't have a credit card available for the same reason.

 

[Notmuchlonger]

Nope haven't had any reducing. They keep paying us to use their card. Thanks to this board we are using the Pen Fed card. I have yet to see anything better. I wonder how they are making any money

 

[youbet]

Now that we're retired with no verifiable source of income for the next two years, I'm expecting our limits to be lowered.

Really? I'm 2+ yrs into retirement, no earned income, and no credit limit reduction. As far as I know, the credit card companies have no knowledge of my retirement. I certainly haven't been sending them copies of my tax forms! They send me a bill every month, I pay it in full every month. They seem happy and haven't asked me to re-verify my income.

Did you tell them you retired? If so, why?

Edited to add: Remember, regardless of the economy and current credit mess, cc companies make money from folks using their card, not from folks not using their card. If they think you're going to pay, they want you to spend via their card!

 

[Rustward]

If someone would have a heloc for emergencies, I don't know why they wouldn't have a credit card available for the same reason.

The fact that you mentioned it here might inform anybody who wasn't already aware. We found out about the coverage reading the airplane magazine on the way home from that trip. Didn't want to go through my own insurance for what was clearly the other driver's fault. No injuries and <$1000 damage to the rental. Tried the cc thing first and found out they were secondary, then decided just to go straight to the other driver's insurance. Worked out OK. First vacation pictures were of the two vehicles and the other driver, the stop sign, the scene, etc. The other driver was very cooperative.

Sorry for going off topic with the car story. We have not had any limit reductions either. When I called in to activate a card that was a replacement for one that had expired the cc company offered me a whole new account in addition to the one I was trying to activate. The new account has a low credit limit and a high interest rate but, as deadbeats, we pay all balances in full each month and don't care about interest rates. Maybe we should care.

 

[Westernskies]

The card companies have a name for those of us who pay our balances in full every month.

Do share!

 

[Notmuchlonger]

Do share!

@##@#%%^!!!

 

[youbet]

@##@#%%^!!!

They still make money from folks who pay off every month and are glad to have us as customers. If they didn't want us, they'd go back to charging large annual fees to drive us away.

Regarding reducing credit limits and increasing interest rates, I'm glad to see it. Way too much credit card debt in our country today and it should be less available and more expensive, IMO. There will be some pain as folks wean themselves away from it. And so be it......

 

[Achiever51]

Yes, American Express recently cut my "Blue" card credit limit by about 10%, but since the credit limit was FAR more than I would ever feel comfortable charging, it was no biggie. Haven't had any interest increases, but the credit card companies sure have been playing all kinds of games (e.g., reducing length of grace period, increasing service fees, having customers on the east coast sending payments to west coast service centers and vice versa, etc.)

 

[Notmuchlonger]

They still make money from folks who pay off every month and are glad to have us as customers. If they didn't want us, they'd go back to charging large annual fees to drive us away.

Without a doubt! Im guessing they would prefer to milk us on the monthly fees though

 

[Rustward]

Do share!

Deadbeats!

I mentioned it in post #13. Learned this in the PBS Frontline show mentioned earlier in the thread.

 

[Bestwifeever]

Really? I'm 2+ yrs into retirement, no earned income, and no credit limit reduction. As far as I know, the credit card companies have no knowledge of my retirement. I certainly haven't been sending them copies of my tax forms! They send me a bill every month, I pay it in full every month. They seem happy and haven't asked me to re-verify my income.

Did you tell them you retired? If so, why?

Edited to add: Remember, regardless of the economy and current credit mess, cc companies make money from folks using their card, not from folks not using their card. If they think you're going to pay, they want you to spend via their card!

No we didn't broadcast the change in income source to the credit card companies, I just figured big business knows everything about us. Glad to hear you haven't had any changes in your accounts!

Not sure they really want us to pay--don't they want us to pay just the minimum?

 

[Dreamweaver]

Thanks to this board we are using the Pen Fed card. I have yet to see anything better. I wonder how they are making any money

What's the Pen Fed card?

I really couldn't say what my credit card companies have been doing. My credit limit was way more than I would ever spend in a month, and still is. I don't pay attention to the interest rate as I pay in full each month. I do pay attention to the cash back rate, and I can say they haven't raised that!

 

[youbet]

No we didn't broadcast the change in income source to the credit card companies, I just figured big business knows everything about us. Glad to hear you haven't had any changes in your accounts!

Not sure they really want us to pay--don't they want us to pay just the minimum?

Oh, they'd like you to carry a balance and pay interest. But they're glad to just have you use the card and pay off every month if that's all they can get from you. Even when you pay off every month, you're valuable to them and they make some money from the transactions.

 

[Notmuchlonger]

What's the Pen Fed card?

I really couldn't say what my credit card companies have been doing. My credit limit was way more than I would ever spend in a month, and still is. I don't pay attention to the interest rate as I pay in full each month. I do pay attention to the cash back rate, and I can say they haven't raised that!

You get 5% back on gas. 2% on groceries and 1.25 % on any other purchase. I haven't found a card that does better. Not saying there isn't one.Everything we can charge we do it. Pay it off monthly. Like getting a discount on everything you purchase.

https://www.penfed.org/productsAndRates/creditcards/overview.asp

 

[youbet]

Without a doubt! Im guessing they would prefer to milk us on the monthly fees though

Well, of course. And car dealers would prefer you to buy silly, expensive options and finance the car. And grocery stores would like you to buy impulse items located at eye level on the shelves. And.......etc., etc. But if you don't, there're still glad to have you as a customer.

Even if you pay your cc every month, expect respectful, courteous treatment as a customer. They do want you.

 

[Jeb-NY]

While we are above the 0 cards some of you have we only have 3 (not the 8 average hat was mentioned). We both cary the same Visa card that pays 5% on fuel and we each have a different Mastercard. My wife's MC pays 3% on fuel, and 2% on groceries, drugs and a few other things. My MC is nothing special other than we have had it for a long time. My MC is only used for internet purchases and automatic payments, this is done so we know what to cancel if there is a security problem, it also has a fairly low max (still 6-10X what we spend most month on it).

We have this card arrangement so if either of us loose a wallet we have one backup card that does not have to be canceled. My wife does most of the charging (accept for the net and fuel) so it makes sense for her to carry the money back card. The reason for splitting the companies is, once many years ago when I had one card, I tried to charge a plane ticket and when they called in to get an ok for the amount a computer was down and it was rejected. I had to go back the next day to get the ticket. Decided then, that I needed 2 different cards in case it happened again, never has. I had a large car rental bill once and they wanted to put it on two cards, I told them that one was all I had, and they took it.

Of the 3 cards one has a 5 figure max and I have actually jokingly offered it twice when a car salesman has asked how I wanted to pay, just to see his reaction. The other two are more inline with reality.

None have been reduces and the 5 figure one was recently increased gain, they seem to do that a couple of times per year. All are paid off every month so I don't even know what the interest rates are or if they have went up.

Jeb