Defend Your Credit Limit

Reeling from mortgage losses, banks are reducing credit card borrowing limits, even for some cardholders with good records. Factors that could lower the boom on you: a minor mess-up (being late on payments, even once), living in a high-foreclosure area and carrying other risky debt (such as an interest-only mortgage). A lower limit can push up your debt-to-credit ratio, which hurts your credit score.

You do have options if it happens to you. Consider one or several of these:
- Make an appeal to the credit card company.
- A computer may have cut your limit, but a customer service rep may be able to bring it back up.
- Bluff
- Threaten to cancel. Hurting for revenue, banks can't afford to lose good customers.
- Compromise
- Applying for a new credit card could hurt your score more than it helps. Instead, ask for a lower APR, which will make it easier to pay off you balance.

- From Money Magazine

Tackling Credit Card Debt

Karen Gross likens excessive debt to a bad hangover. “The last thing you want to do is try to relieve your financial headache with a solution that will be worse than the hangover itself,” says Gross, the president of the Coalition for Consumer Bankruptcy Debtor Education (http://www.debtoreducation.org). Quick fixes rarely work, according to Gross, who offers the following four-step formula for getting on track.

1. Hold your horses, stay calm, and don’t rush into any impulsive arrangements. “Don’t panic,” Gross advises. “It’s essential to pause, take a deep breath, and look carefully at possible solutions.”

2. Examine your situation. While your debt problem may be serious and appear urgent, first get an accurate sense of the extent of your situation. Gross says: “Lots of organizations offer help, but don’t take the first solution that comes along. Take time to assess, compare, and contrast multiple solutions.”

3. List your options, including the pros and cons of each. For example, while a home-equity loan may seem like an appropriate solution, it’s not always the best course of action because it can put your home at risk.

4. Pay at least the minimum amounts due on all of your credit cards. This last step is critical because of the “universal default” clause, which permits a credit card company to raise your interest rate if you’re late on another company’s credit card or any other outstanding loan. Lenders argue that it’s logical to raise rates for a consumer who has shown evidence of becoming a greater risk. (Scott's note here: Not all credit card companies will raise your APRs if you've been bad on another bank card.)