Banks are Cutting Credit Card Limits

Consumers continue to pay late on their credit cards and a few of the large banks are fighting back. Washington Mutual and Wells Fargo recently cut credit limits by 10% and 3% respectively, according to a recent New York Times article. If you fall into one of these three categories, you might see your credit limit fall, too.

1. You recently made a large purchase relative to your credit limit.
2. You live in California, Florida, or Arizona, the places hardest hit by the housing crisis.
3. You own a small business in real estate industry.

Since credit card companies have 30 days to notify cardholders of credit limit cuts, you could inadvertently exceed your credit limit without realizing your limit has decreased. Exceeding your credit limit will cost you hefty fees and precious credit score points. The closer your balance is to your credit limit, the further your score drops. (See 15 Credit Score Killers.)

Save yourself from the embarrassment of a declined card, from the extra cost of over-the-limit fees, and from a damaged credit score by checking your credit limit before using a credit card. Read 5 Ways to Avoid Over the Limit Fees for more ways to avoid the hefty fees.

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