Maximum Overcharge: Tightening Credit Card Limits

As the economy has weakened, some credit card companies have scrambled to limit debt by reducing the credit limit on consumers’ cards.

In a January 2009 survey, the Federal Reserve Board reported that credit card companies are pulling back on the credit limits for individual credit card holders. In the survey of 53 American banks and 23 foreign banks with domestic offices, about 35 percent report slashing maximum limits on credit cards.

Individual credit card users are not the only ones feeling the crunch. A total of 30 percent of banks also reported decreases in the amount of credit limit to businesses on their cards, as well.  The survey reports a general trend toward limiting credit of all kinds.

When a credit card limit is slashed it can mean financial pain for the cardholder. Sometimes, a balance that was once under the limit can quickly become over the limit.  That means the credit card company then can place over-the-limit fees on your account.

In a complaint sent to the Federal Reserve, a Dallas-area man noted that after only one late payment, a friend had had his credit limit slashed, and over-the-limit fees were placed on the friend’s account.  This was a particularly noteworthy complaint – the man was a retired lawyer who had represented credit card companies in the past. 

This fact introduces a new worry for all consumers. The law will change in 2010, extending the amount of notice on changes to a credit card policy from 15 days to 45 days notice.