More credit card companies are drastically cutting credit limits on millions of card holders – even those that have not missed a payment.
Why?
Credit card companies are constantly analyzing the debt loads of their customers and are closing the credit spigot to mitigate potential future losses. They know that maxed out credit cardholders often leads to their financial distress and default.
This makes perfect sense to me, but may come as a drastic surprise to many cardholders who have been loyal to “xyz” company for years. I’ve interviewed many bankruptcy clients who express outrage over being cut off even as their overall debt load rises.
Many clients tell the stories of paying off large balances only to have their cards cancelled immediately after receiving payment.
They express anger at this tactic as unfair and disloyal – sometimes the stated or unstated basis for their anger is that they no longer have that card to rely upon in their budget shortfalls.
The fact that you’ve been a “member since 1994” is meaningless in this cut throat economic environment. “Customer loyalty” is now a meaningless corporate slogan. There is no loyalty among banks and credit card companies.
You are now simply a profit center, and if you miss a payment or are late with a payment, they will reward your “loyalty” with increased interest, penalties, late fees, cutting off your credit or reduction in credit limit.
These companies have lent billions and billions of dollars that quite possibly can never be repaid, but since credit card companies live off the interest and small principal payments made when you make a minimum monthly payment, they are happy to continue to collect those payments forever.
They really don’t care if you ever pay off the balance, and so long as you don’t default, they will happily accept your monthly minimum monthly payment – forever.
Yes, they want you to be forever on the hook.
Just a few years ago this situation was just reversed. They credit card companies were falling all over themselves to raise not lower your limits.
We”re in a different environment now with banks seeking government bailouts for lending beyond their means (as defaults and bankruptcies have risen their profitability disappeared and losses became rampant).
The easy credit days are over. This is a good thing.
Although bankruptcy is about getting a fresh start, it’s also about accepting responsibility about what put you in that situation and planning for the future. Many reasons exists for the overuse of credit, including job loss, loss of overtime, sickness, disability, of simple lack of financial education.
The one lesson that I’m continually be reminded about as bankruptcy lawyer is that life is less certain than what we would like it to be. Life happens and life is sometimes messy.
Disclaimer
Fresno-Bankruptcy-Lawfirm.com is owned by the Law Offices of Jeffery D. Rowe. We are a debt relief agency. We help people file for bankruptcy relief under the Federal Bankruptcy Code (Title 11 of the United States Code). If you would like to discuss your situation in further detail, please call our offices at: (559) 228-1500 to schedule a consultation.
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Tags: card holder, credit cards, credit limits, customer loyalty