General Findings
A good amount of consumers are starting to see that credit card companies are dropping credit lines on credit cards but why? Even though people are paying their bills on time they are watching credit limit reductions without having a way to do anything about it. As a personal financial consultant I have been asked a few questions by clients that I think you may want answered as well. Here they are:
Q: Why are the credit card companies doing this to me?
A: Well first off, you are not the only victem in this process. banks all over are doing this to many card holders. The reason although it seems to be unfair is actually pretty simple to grasp. In early 2009, Caroly Maloony along with other major aspects of the United States Government started what is now known as the credit card reform. This reform started with a simple act called the cardholder bill of rights and has grown through many acts and legislations since. Banks argue that the new credit card reform rules and regulations will not only cut into their profits but have an effect on their ability to “price for risk”. Needless to say loaning money wether for credit cards or any other kind of loan carries a risk to the lenders. Due to some of the rules these risks are harder to take unfortunately this is what is leading credit card companies to reduce credit lines even if you are the perfect client.
Q: Will a credit limit reduction effect my overall credit score?
A: This is another unfortunate thing. Although I do not like to be the bearer of bad news, I feel that it is vitally important that you fully understand what is going to happen. The short answer is YES THIS WILL HURT YOUR CREDIT SCORE! But, I want to explain to you why. Although there is no one that can truely tell you the secret as to how credit scores are calculated, there are a few pieces of the puzzle that are pretty much public knowledge. One of these pieces is all about credit limits. It goes something like this, your credit is effected (although I can’t tell you what percent of your credit score this may effect) by credit lines in this way – It is something called your debt to credit ratio. Many proffessionals including myself say it is best to keep this ratio at 50% or less. This means that if you have a credit line of $10,000.00 on one of your credit cards, you want to make sure not to carry a balance of no more than $5,000.00 on that particular account. Here is where the problem comes in for most card holders lets say you have a $10,000.00 credit limit today and you have a balance of $4,500.00 well, you are doing what is best to keep your credit score in tact on that card. Lets say tomorrow the lender decides to reduce your credit line to $5,000.00 and unfortunately you do not have the funds to pay the balance down to $2,500.00 or less. Well at this point this is going to effect your debt to credit ratio and eventually your credit score.
Q: Is there anything that I can do to stop this from happening or repair the damage?
A: As far as stopping the process, I regret to inform you that this process can not be slowed, halted, or stopped in any way. This is something that the banks are doing no matter who you are or how you pay toward your account. On the other hand, there are ways to start repairing the damage once it has been done. Even if you cannot pay off your balance or the portion of your balance that needs to be paid off to fix the issue, you might still qualify for a balance transfer credit card. You can use a balance transfer card to pay off the portion of the balance that you cannot afford to pay off cash. Doing this may prove to be a great move as far as your credit score is considered. When looking for good balance transfer opportunities I always advise Discover credit cards because of their excellent customer service and the fact that they are not participating in most of the aspects that are harming consumer credit scores.
For more information on this topic or any other financial topic feel free to contact us:
By phone – (561) 355-0069
By email – Support@JemCreditCards.com
On the web – www.JemCreditCards.com
Tags: Credit, credit card, credit cards, credit line, credit score
Posted in Credit · March 12th, 2010 · Comments (0)
Most of us have not less than one credit card. Whereas debt is an issue within the UK, these cards could be extraordinarily helpful as long as you handle them correctly. One way of doing that is to use a zero% credit card.
The cards could be very useful for large purchases earlier than pay day. If, for instance, you wish to e-book a vacation you are able to do so with your credit card, then repay the balance once you get paid.
The issue with bank cards is they typically have a really high interest rate. Chances are you’ll find yourself paying around 20 per cent additional on high of your purchase just in interest. This may make your debt difficult to pay off.
In case you are simply assembly the minimal cost each month then your debt will hold accruing curiosity and you will see that it troublesome to precise make a dent in what you owe. If you can’t afford to repay your whole debt then you should look at transferring your balance to a 0% credit card.
Most playing cards offer a 0% stability switch deal. Which means the card company will successfully pay off the stability in your outdated card using a new card you’ll take out with them.
The interest rate on the brand new credit card will then be zero%, that means you’ll not accrue any interest on it whilst you repay the debt. This provides you a good probability to make some headway in clearing your debts.
After getting a 0% bank card it is best to make a very good try to pay it off. While you are not accruing interest, it’s still a debt it’s best to aim to clear. In addition, zero% balance transfer charges rarely final for more than 12 months. As soon as this period is up you’ll start accruing curiosity on your debt once again.
If it is unimaginable to repay your debt throughout the interest-free interval then it’s best to take into account transferring your steadiness once more on the end of this era onto one other interest free card.
Nonetheless, this should not be seen as an alternative to clearing your debt, however rather as a way of enabling you to handle the repayments extra effectively.
It’s also very important that you simply remember not to use your new bank card for brand new purchases. The 0% interest rate usually applies solely to your stability transfer. Subsequently, once you employ the cardboard, any new purchases will be subject to another interest rate, generally quite a high one.
While you make funds then the cash you pay can be used to pay the curiosity on the brand new purchases as opposed to paying off some of your excellent stability transfer.
If you end up in problem with your playing cards and repayments then it is best to all the time search advice. Your card firm or financial institution can be ready that will help you if you inform them you are in trouble. Burying your head in the sand will solely escalate the issue and make it worse, but a zero% bank card might help you in your way.
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Tags: Bankruptcy, Credit, credit card
Posted in Credit · March 12th, 2010 · Comments (0)