Credit Card companies are automatically reducing your line of credit

If your credit card limit has suddenly plummeted for no apparent reason, don’t be surprised. Lately, credit card companies have started to review customers’ account history, looking for reasons to cut off or reduce their lines of credit – even if you pay your bills on time! Here are the details, courtesy of Real Simple magazine.

Credit card issuers are monitoring what we buy. Robert Manning is the founder of the Responsible Debt Relief Institute – a nonprofit organization in New York. He says that creditors are looking for changes in how and where we use our cards. For example, if you’ve never been to a dollar store, but stop by to pick up a pack of gum, the credit card companies will see that you have made a charge at this type of discount store and may assume you’re having financial trouble. Or, if you never put restaurant meals on your card, and you suddenly charge a chicken sandwich at McDonalds, they might think you’re low on cash.

What come after the credit card company gets concerned about your purchases? Manning says you might receive a letter saying that your credit’s been cut off, or reduced by as much as 80%. Once it’s cut, you could end up with a limit that’s too close to your balance – which will reduce your credit score and raise a red flag to other creditors.

How can you protect yourself? Manning says don’t use your card to pay for items you don’t normally charge, and avoid charging anything that could indicate personal issues, such as marriage counseling – which could indicate a potential costly divorce or a large number of drinks at a bar – they might assume you have a drinking problem that could lead to employment issues. If your credit line has been reduced, keep your spending behavior consistent, and in six months, call your credit card company and ask for your old limit to be restored.

There is no need to panic, just be careful when using your card for items you would not normally charge and ofcourse, always be sure to pay those charges off each month if you can. Hum. Why didn't I think of that....