More sneaky credit card tricks: Lower credit limits can start you on a downward spiral

Reports of consumers with good credit histories having their credit card limits lowered for no reason are becoming commonplace. Consumers are logging onto their online accounts, and finding that their limit has been lowered and they weren't told anything about it. And this problem can set you on a downward spiral quickly.

A lower limit means you're in greater danger of going over your limit, and therefore incurring penalties. Your credit score may also suffer, as one component of the score is how much of your available credit you've used. A new lower limit can mean you've used a greater percentage of your limit.

And a lower credit score can cause your other accounts to be negatively affected. Some credit card companies will make changes to your terms based upon a lower credit score or worse credit condition in general. You might get hit with a higher interest rate, another lowered limit, or a closed account. Those negative actions could then further impact your credit score, and you can see how easy it might be to get in real trouble quickly.

The best way to avoid these problems is to not use credit cards unless absolutely necessary, or unless you intend to pay the balance in full each month. If you've already got credit card bills, work on paying them down consistently, and stop using them so you don't make the problem worse.

It's not a surprise that credit card issuers are making life more difficult for consumers. They're looking to protect themselves, and are doing so by creating restrictions for their customers. I've said it before: Credit card companies basically own their customers. Their credit agreements give them the right to do just about anything they want with your account whether you like it or not. The only real way to take back control is to not use credit cards unless you absolutely have to.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
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