I've held my Direct Merchants Bank card for over 10 years. Have always paid on time. My husband and I had FICO scores around 780-800. Without warning, my credit limit was reduced by 50% around April 25th. I called to speak to a rep and was told (after much trouble dealing with her accent) that it was because I was "not maxing out my limit and was not using it enough." I laughed out loud and asked her if she realized how little sense that made, since my FICO score would plummet if I maxed out my cards. I told her that the industry could not have it both ways: they could not penalize me for lack of full use of the credit limit and also penalize me for using too much above the recommended 25%. I told her to stop reading from her monitor, and listen to me. She kept repeating the same drivel from her monitor and I said she needed to get a supervisor immediately.
The supervisor sounded like an American with no foreign accent and I repeated to her what I had told the first line rep. She then said, "the company determined it had too much risk in credit cards and has reduced everyone's credit by 50%. You were not singled out." Hogwash, from what I have been reading. They are chopping down many folks credit limits as they pay down their cards, following them all the way down.
I researched on line and discovered that HSBC got in trouble with the 2nd mortgage market. I do not know how much TARP money they may or may not have taken. I posted my story on a Yahoo financial blog, and emailed several friends about it. I was stunned to read the responses. So many people have been hit with this credit line reduction, it's astounding. Most reported having cards for many years, and managed their money very well. Many bank cards I heard about are from financial entities that I know got TARP money, so, as others have said, they did, indeed, take our money and screw us with it twice. The intent was to free up credit, not choke it down, and yet that is what they are doing to bolster their bottom lines. It's criminal that the credit card laws were not ready at the same time that Mr. Paulson was on his knees begging for funds. He and they all knew this would happen. They would take the funds and rip us off, yet again. I am waiting for the other shoe to drop, and discover that our other cards have reduced our credit limits, too.
Although the new credit card laws will take effect in several months, I don't think there are any "clawback" laws that can help us out, such as restoring the credit lines of those of us with great track records who have worked hard to build credit. We are totally at their mercy at this point. We will have to manage our money even more, and rebuild our FICO scores. We are tightening our budget so that we can pay down our remaining balances to restore the FICO scores, and then make sure we pay off all charges each month.
For those of you out there who are angry and are tempted to close your accounts, or put your cards in a drawer out of protest, think twice. You need to maintain your credit and FICO scores. Don't trash them out of anger. If you don't charge something, anything, for 6 months, your card drops out of the "queue" for being counted toward your total credit limit. And your FICO scores will suffer. You will need them in good shape for a variety of reasons from insurance rates to job applications to home and car purchases and other reasons. Read Suze Orman to find out more. And if you don't use a credit card for something like a year, you could find your account closed. Please read the fine print in your credit card paperwork, or call and talk to someone about getting a copy of your agreement. Use your cards, if only for a Starbucks or a tank of gas once a month or so. Keep them active.
This industry is trying a quick fix to its self-inflicted problems by cutting our credit and its exposure. But it will pay the price. Many of us will be angry and/or scared into not using credit, and they will have dramatic loss in business. Then, 3-4 years from now, we all will be inundated with credit card offers again, as we were several years ago. Only this time, we will not fall for it. My husband and I are planning to go to bank debit card, and only charge $50 or so per month on each card to keep them active. We will keep our credit, whatever it is by then, for real emergencies. They will not make any money off us for carrying any balances. They got our bailout, but they won't get into our pockets any more.
Rubyslippers
Dallas, Texas
U.S.A.
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