Reduced credit card limits can cost you cash and give your credit rating the shaft

January 16, 12:46 PMSF Financial Fraud ExaminerPaul Springer

Previous Next

1 comment Print Email RSS Subscribe

Subscribe

Get alerts when there is a new article from the SF Financial Fraud Examiner. Read Examiner.com's terms of use.

Email Address   Include other special offers from Examiner.com Terms of Use

Given the galactic dimensions of the ongoing credit crunch, it's not surprising that many credit card issuers are reducing existing lines of credit.  The truncated credit limits could be annoying, for obvious reasons, but they can also cost you cold, hard cash.  And the grief of bouncing a check--priceless!

I found this out the hard way after attempting to use one of the "convenience checks" that WaMu has dumped in my mailbox on a monthly basis for years.  Faced with an unexpected expense, I wrote an $875 check to a third party--and had to pay an extra $25 fee when it bounced.  Not that convenient really.

Why?  That's the question I asked a customer service rep at WaMu, who informed me that my account had been closed due to lack of activity.  That's just great, but common sense would dictate that such closure would occur either a) with time notification by the issuer, or b) after the expiration date of the last bunch of checks.  

I did get notice of the closure--several weeks after it happened and cost me $25.  And sent to my old address, as usual.

The bank has my address, phone number, and e-mail--there's no excuse for failing to inform clients of account closures.

So be careful if you're using these "convenience checks," especially from a failing institution like WaMu, since the associated costs may not be convenient at all: bounced check fees, abortive transactions, damaged credit ratings, general embarrassment and annoyance all around.  Just having your limit pruned can affect your credit rating negatively.

And don't forget to watch for the transaction fees on all this 0% junk you get in the mail.  These days most of the 0% purchase and transfer credit entails a 3% fee, which equates to more than that depending on how quickly you pay back the debt. If you pay a 3% fee on a "0%" and repay the amount in three months, that's like paying 12% on an annual basis, so you might actually do better to make the purchase on a card with a low rate and take your time paying it off.