How to Decrease Credit Card Attrition

Faced with an increasing number of charge-offs and a liquidity crunch, credit card issuers have been slashing their customers' available credit limits to reduce liability. Some analysts have suggested that over $2 trillion of lines would be cut by the end of 2010. Lower available credit may hurt your purchasing ability, your personal cash flow management and even your credit score. Per most card agreements, creditors do have the right to raise or lower your credit limit at their discretion. However, there are some things you can do to make it less likely you will be part of the estimated $2 trillion in credit line cuts that have been taking place since 2008 and be able to maintain your credit lines in what appears to be a credit-restricted future.

Instructions

1

Use your credit cards. You may be more at risk for having your credit limits slashed if you are not periodically using your credit cards, or only using a small percentage of your outstanding available credit line. For example, if you have a $5,000 limit but your average daily balance over the last year is $500, the card issuer may assume that a reduction of your limit to $2,000 will not be that big of a deal for you. When you use larger portions of your available credit limit, you are sending a message of loyalty to your card issuer. This may not exclude you entirely from having your line reduced, but creditors would prefer to avoid reducing limits of committed customers, where viable.

2

Pay on time. Paying on time is not only good for your credit score, it is also part of your agreement with the card issuer. A missed payment leads to fees, higher interest rates and a reduction of your available credit lines. Creditors see late payments as a sign of delinquency, and a red flag that you may be an at-risk customer. Remain a customer in good standing, and card issuers will be less likely to reduce your available credit.

3

Stay under your limit. If you frequently approach the high level of your balances or habitually go over the limit, credit card issuers may label you as a high-risk consumer and reduce your available credit. A history of being unable to reduce your outstanding balance may indicate to the card issuer that you are having trouble, and are at higher risk of default. The card issuer may respond by cutting your available credit. This may keep your balance in an over-the-limit status for awhile, but you will be unable to make new purchases on this particular line as you pay down small portions of the balance.

4

Call customer service. When you find yourself on the wrong end of a credit line reduction, a resolution may only be a phone call away. Consumers often find out about a credit line reduction via a notice in the mail, or by logging into the account online. A quick and courteous call to customer service, asking for more details on the credit line reduction, may provide some valuable insight and provide you an opportunity to ask for the decision to be reversed. This approach seems to work well when your account is in good standing, have a long history of usage and even have accrued a manageable level of interest charges while you have been a consumer.

5

Keep other accounts in good standing. Card issuers look at more than your payment history with the account in question -- they will also look at your creditworthiness across your various credit accounts. Derogatory remarks on your credit report such as late payments, charge-offs or collections can be used by other creditors to assess your overall ability to repay debt. To reduce the risk of credit card issuers cutting your limit, review your existing credit report for any negative reporting items, and make sure you stay current with your other outstanding credit accounts.