Friday, April 15, 2011

What Your Credit Card Company Won't Tell You

Credit Limit Increases

So you have a $100 credit card limit and need at least $500. You pay your bill on time so why can't you get an increase after 5 years? One reason is insurance. It typically costs about 10 cents to $1 per $100 of your balance. For example, if you owe $500, the insurance is $5 for that billing cycle. The insurance cancels an agreed upon number of payments for a specified time in the event of death, injury, loss of employment, birth, relocation, and change of marital status. If you currently have no insurance for your credit card, add it. It's not only a wise choice but within 60 days you will find that your credit limit has dramatically increased.

Another reason your limit has not been increased is payment history. If you have paid your card late in the last 12 months, you will be denied an increase. If you pay off your balance every month you are not establishing a balance payment history. Carry a balance for 3 months before paying it off. The bank needs to believe they will make money off of your interest. Once you receive the limit increase, go back to paying in full.

The last reason you haven't received a limit increase is your credit. If you only have one store credit card and all of your other credit items are reporting late or delinquent you will not receive an increase.

Disappearing Credit Limits

In March you had a $2000 limit. In April you only had a limit of $800. What happened? Why weren't you notified? This is something new with store cards like Macy's as of March 30, 2011. Here's what's happening. Because of the current credit card laws and economic stress of consumers, banks are reclaiming control of the credit they loan out to consumers. With Macy's, if you pay late, your limit will automatically be reduced to the amount you currently owe. You then have to request permission to have your limit increased. Once this happens, you have to reapply for a limit you already had. Pay late more than once and you can lose the card completely. During the authorization process you will be asked for your income information and your credit will be run with or without your permission. If you report a lower income, your credit limit will be lowered or terminated. If your credit has declined, you will lose your credit limit or completely lose the card. Use payment reminders or pay your bill immediately so you don't lose the increased limit.

Annual Fee Shakedown

Banks like Bank of America are recouping their lost revenue by charging annual fees for their credit cards. This spring, many Bank of America customers received a letter informing them of the new $39 annual fee for their credit card. There is a choice. You can pay the annual fee or you can lose the card. If you decide not to pay the annual fee you still have to pay the balance on the card. Some consumers received a letter where that choice was not given. They merely were told that their card accounts have been closed and they still owe the balance. This is enraging long term customers who have never paid late. What you aren't being told is the reason. The reason is that the bank is running your credit and finding that you are paying your other bills late or not at all. To reduce risk, banks are closing the accounts of people who slid under the radar by not using their credit card or by paying only the minimum. If you are upset about a $39 fee then you probably can't afford to have a credit card.

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