Consumer Action poll: Cardholders see credit limits drop

Almost 18% have had credit limit lowered

Contact: .(JavaScript must be enabled to view this email address), 301-718-2511 orKen McEldowney, 415-777-9648

Aug. 27, 2008—If you are planning to use your credit card to make a big purchase, you may want to check your card’s line of credit before you pull out the plastic. Consumer Action conducted an online poll that asked if respondents had ever experienced a reduction in their credit card limits that they had not asked for. Almost 18% of the 1,083 consumers who participated in Consumer Action’s Credit Limit Survey said their credit limits had been lowered by the banks. Close to half (9.2%) said they’d seen their credit lines drop this year. Consumer Action conducted the poll between June 23 and July 15, 2008. The poll results are published in the Summer 2008 issue of Consumer Action News, the organization’s newsletter. Click here to go to view the newsletter online. Credit card companies regularly review the credit scores of account holders to determine whether or not they might become poor financial risks. Consumers may see their credit limits reduced if issuers believe they may not pay their debts. During Consumer Action’s 2008 Credit Card Survey, customer service representatives at six financial institutions (American Express, First Command, HSBC, US Bank, Washington Mutual and Wells Fargo) told CA surveyors that they would reduce cardholder’s credit limits because of perceived customer risk. Factors included a decline in cardholder credit scores, late payments and balances that go too close to the credit limit. Several of the banks that said they would not reduce credit limits reported just the opposite in 2007. They are Bank of America, Chase, Citi, Discover, and EverBank. With the possible exception of Citi, which made a pledge not to change cardholder terms until their cards have expired, Consumer Action believes it is unlikely that these banks have changed their policies.

Interest rate hikes

Nearly half of those who participated in Consumer Action’s online survey said they’ve also experienced interest rate increases (apart from variable rate fluctuations). A whopping 48.6% said their credit card interest rate had been increased at some point in time. From our poll, we cannot determine whether those who’ve seen their credit line shrink also have had interest rate increases on the same card. Bills pending in the U.S. House and Senate this year would prevent card issuers from increasing interest rates on customers’ existing balances. While consumers who are considered a greater risk could still see their interest rates rise, proposed legislation in the House would limit that rate hike to future purchases, making a cardholder’s current balance off limits for increased finance charges. The poll also indicated that the economy is causing many families to tighten their belts. The highest number of respondents (42%) said they were using less of their credit, followed by 32% who said they were using about the same amount. Only 27% said they were using more of their credit. About a third (34.2%) of respondents said they have been charged an over limit fee. The online Credit Limit Survey, conducted between June 23 and July 15, 2008, was designed to gauge consumer experiences with maximum spending limits. Respondents, numbering 1,083, came from all 50 states and the District of Columbia. Of the people who chose to identify their first language, 95% were English speakers. Spanish speakers accounted for 3.5% of respondents. The survey was conducted through Consumer Action’s web site and promoted by email to Consumer Action’s network of community-based organizations, online members, [email protected] Center subscribers and people who had lodged complaints with the organization.
 
 

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