Credit Card Companies Cutting Credit, Rewards; Upping Interest Rates.

Wall Street gets a bailout, regular old Americans see their available credit decrease, their interest rate go up, and their rewards get smaller…

Big lenders “” like American Express, Bank of America, Citigroup and even the retailer Target “” have begun tightening standards for applicants and are culling their portfolios of the riskiest customers. Capital One, another big issuer, for example, has aggressively shut down inactive accounts and reduced customer credit lines by 4.5 percent in the second quarter from the previous period, according to regulatory filings.

Now, I cannot say that this is necessarily a bad thing in the long run; but right now with people getting laid off, grocery prices skyrocketing, and small businesses trying to make ends meet, is it a good or a bad thing to cut off credit so quickly? The credit industry needs to be tightened up, for sure, but taking away credit from perfectly reasonable people who have always paid their bills on time seems a bit much.

Banks are slowly removing balance transfer offers (here are some 0% balance transfers still available), giving away cheaper rewards, reducing credit lines, upping interest rates by 2 or 3 percentage points, and shutting down inactive accounts. What I don’t understand is why we are “loaning” our tax dollars to these companies and then getting our needed credit shut off in return. They will surely take our money; guess they don’t want to loan it back.

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Comments (8)

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  1. lulugal11 says:

    Yes one of my credit card companies reduced my credit line to $500 because of ‘inactivity on the account for 3 months’. What am I going to do with that limit?

    I have been a good customer, always paid on time etc. but if they wanted to reduce the limit to less than what it was when I opened the card 5 years ago then I don’t need it.

    Increasing the interest rates does not make sense either because it means people have to pay more each month if they carry a balance. Consumers are already strapped for cash…..so how is a higher minimum payment going to help?

  2. Abigail says:

    I guess that I’m just lucky, but I haven’t yet had problems with my cards. In fact, my husband and I just received notice from one of our cards that our limit is being *increased* so I don’t know if it’s a fluke. Perhaps, like most things, the media is overstating the severity because drama sells? Or perhaps this is an isolated incident because in the past I’ve had this card at a much higher daily balance — and the company is hoping I’ll do it again?

    Either way, I think it’s an important sign that not everything is going to hell in a handbasket.

  3. David Y says:

    @Abigail. I recently got a notice like that too. It said they noticed I had not used the card for a couple of months. So they increased the credit limit. Maybe mine was a fluke too. In my case, I’ve never come close to the old limit though.

    Not sure what it means.

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  6. Kristina says:

    This is NOT a fluke, or a media frenzy. I held my breath after the news in October about Bank of America raising their rates, but didn’t get a notice then, so finally let out a sigh of relief. That was UNTIL a week ago when I got my dreaded letter that they were DOUBLING my low fixed rate, and changing it to a variable rate. I don’t carry large balances, always pay more than the minimum, and in 10 years have NEVER been late or over my limit – haven’t even come close to the high limit. I owe practically nothing on the card, and they still wouldn’t give me a lower rate, despite the fact that one was advertised right on their website where I pay my credit card bill!! I have EXCELLENT credit, and am now shopping around. I had always liked BOA, but now could care less about them. Their reason that they gave me for raising my rate – the economy… Well, their situation with me has always been stable, and now, despite receiving bailout funds, they want ME to foot the bill for those who were irresponsible… Wasn’t the tax money that I pay enough? Apparently not. It is not a fluke – it is real, and only a matter of time until it happens to you, too…

  7. david says:

    They can do it to me if they wish, I dont ever carry a balance. And the taxes you pay have nothing to do with people defaulting on credit cards. Interest rates pay for those people, not taxes.

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