In the midst of a global financial and solvency crisis that’s left U.S. banks largely unwilling to extend loans or credit to many individuals, small businesses, or even other banks, 62 percent of credit card companies are reducing their customers’ credit card limits, often suddenly and without notice, reports CNN Money (“Consumer Credit Limit Crackdown,” Sept. 26, 2008).

According to the American Bankers Association, some of these credit card issuers are cutting consumer credit lines by more than 50 percent, and even consumers with good credit histories and high credit scores could see their credit limits reduced.

“Credit lending standards are tightening across the board, it doesn’t matter how great your credit score is,” said ABA spokeswoman Carol Kaplan. “This is happening everywhere, to everyone.”

Consumers who have their credit limits cut back are at greater risk for unknowingly exceeding their credit card limit. Since credit card companies have up to 30 days to inform a customer of a credit limit change, customers may not receive a notice about a reduction in their credit limit until after it’s already gone into effect.

Affected customers running up even just a dollar over a new, lower limit, could get hit with a $25–$35 over-the-limit fee, as well as a higher annual percentage rate, which many banks will assess as a penalty for over-limit spending.

With a lower credit limit, the very same credit card balances a consumer was carrying the month before will now be using up a greater percentage of the consumer’s available credit. This higher percentage of debt to available credit can bring down a consumer’s credit score and hurt a consumer’s ability to secure new credit — a home loan, car loan, student loan, even approval on a rental application.

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