Credit Card Companies Slashing Credit Limits

Now you can blow your credit card limit without even spending a dime! That's right folks, credit card companies are cutting credit card limits even well below your balance. David Smith would have not minded that American Express cut his credit line down to $ 5000.00 except that when American Express reduced his credit he had an outstanding balance of $ 8,500.00 David found out when he was declined a purchase and called American Express to inquire and they were unable to fully explain why they had done this especially because he had always paid on time. As bad as this sounds, this practice by credit card companies of of cutting credit card limits is perfectly legal, at least for now.

Federal reserve rules require that credit card companies notify cardholders at least 45 days prior to reducing a credit card limit but since there are no penalties credit card companies are just no doing so. Congress is hoping to stop this practice by trying to introduce the Credit Card Act which would offer credit card holders protection by requiring lenders to lower penalty rates within six months once the card holder gets back on track with payments.. Earlier this month the House Committee on Financial services announced a series of hearings that will include discussions about credit card reform.

One of the main reasons that credit card companies are reducing credit card limits is to reduce their overall outstanding liabilities. Another reason may be to try and get consumers to close their accounts for good. It is very important for consumers to try and catch any changes to their account immediately before going over reduced limits or even finding out that your purchase was declined.