Persels & Associates Warns Consumers to Watch for Drops in Their Credit Limits

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Newly cautious card issuers cut available credit, Persels experts say

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Tough economic times have newly cautious card issuers cutting available credit. Some consumers are shocked when they find a credit card company has lowered their limit without warning

Tough economic times have newly cautious card issuers cutting available credit. Some consumers are shocked when they find a credit card company has lowered their limit without warning. Even those consumers who pay on time have been subjected to an arbitrary credit card limit drop.

Persels & Associates and its predecessors have been working with clients to restructure debt payments for over 10 years. The law firm bridges the "gap" that can exist between the consumers and creditors. The firm’s ability to provide legal advice and negotiate payments consumers can afford can be essential to people working their way out of debt.

Persels & Associates, a debt relief law firm help consumers settle their debts, follows the credit card industry and noticed changes.

For example, the economic downturn has seen a large spike in the number of people who have defaulted on their credit card bills. For another, the Credit Cardholders’ Bill of Right Act recently became the law, restricting some of the business practices of the credit card companies, Persels experts say.

Another issue is that many people, particularly after the last decade of rampant growth in credit limits, have seen their credit limits reduced.

So how do credit card companies decide when to lower a consumer’s limit?

One way is that they data mining to watch what consumers buy. Every time a consumer makes a credit card purchase, the credit card issuer’s computers store a record of that purchase. Credit card companies draw financial conclusions based on what consumers buy and where and notice when spending patterns change.

Let’s say a consumer normally shops for clothing at Nordstrom. Based on this, the credit card company would conclude that this consumer fits the profile of an average Nordstrom customer, meaning they have a fair amount of discretionary income.

Now, let’s say this consumer is suddenly a bit worried about the economy and decides to curb their spending and start doing things like buying jeans at Kohl’s with their credit card.

When the credit card company analyzes the data, looking for spending changes that might affect credit limits, they’ll observe from their data that this consumer is spending a lot less at Nordstrom and a lot more at Kohl's. That means this consumer’s spending profile has changed – one that signifies the potential for financial trouble.

Just based on the data that says this consumer is now shopping at less expensive stores, a credit card company could decide to lower the credit card limit.

Persels Outlines What can Consumers Can Do to Protect Their Credit Limits

Consumers can do things to guard against a credit card company lowering their limit.

First consumers should avoid being in any kind of position where a credit limit change has any impact. Credit cards should be used as a tool not something consumers need to use to survive.

Another is to never carry a balance on credit cards. If a bill comes at the end of the month, Persels says, pay it off. Carrying credit-card debt is never a good thing, but it’s really not a good idea these days. Bigger balances make consumers prime targets for credit-card companies looking to reduce credit lines, since the banks worry that consumers may not be able to pay your tab.

Lastly watch the mail. When credit-card issuers lower credit limits, they must notify consumers. Typically, that will be done by mail. So consumers should pay attention to what’s sent. Consumers should also review their monthly statement for changes, including a lower credit limit, interest rate spikes and new penalties.

About Persels & Associates
Persels & Associates, LLC, and its entities are pioneers in the field of offering "unbundled" legal services to individuals who cannot afford traditional legal services. As Americans credit debt rose, Persels & Associates bridged the "gap" between consumers and their debtors. Today, Persels & Associates employs over 150 lawyers in the 47 states and has 25 central office staff attorneys with over 50,000 clients. For more information, please visit http://www.perselsandassociates.com.

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Karen McGagh
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