Credit card industry may cut $2 trillion of lines

Thought the FW community might be interested in this article. Been waiting for the cuts to my lines but so far so good.

http://news.yahoo.com/s/nm/20081201/ts_nm/us_finance_research_op...

prosper here you go!

I'm guessing that there will be abundant availability of credit to us with excellent scores. The banks will be under a lot of pressure to show consumer lending. They'll have to find someone to lend money to. Their new partner will demand it.

Now, what to do, for those of us having lots of credit cards with huge credit lines?

1. How to avoid credit card companies closing our accounts?
Most likely, we will have to charge a small amount on our cards (especially the oldest) once every few months to avoid closing (inactivities).

2. but how to avoid them from cutting our credit lines?
This one will be tough unless you charge a lots on your high limit cards.
For example, if you have a $50K limit card, and only charge $10 or $20 a month, they probably will cut your limit.

Any ideas/tips?

There are people used high limit credit cards to charge only once out of every blue moon.

I have friends purchased easily $20K to $30K worth of merchandizes especially when there's a potentially money making deals. These are resellers, normally only stock up merchandises once a year especially before the holidays shopping.

echip said: 2. but how to avoid them from cutting our credit lines ?
For example, if you have a $50K limit card, and only charge $10 or $20 a month, they probably will cut your limitCharge $50k in giftcards and hope you have a low APR

I suggest that you do your own pruning instead of letting the banks choose which cards you keep.

If you have have 20 credit cards and only really need a few of them, then terminate the ones you don't need. That way, you make the choice for which cards to keep, not the banks.

The banks need to contract credit right now. It's part of the cycle we're in. Help them out.

Plus if you pare down the number of credit cards you have now, then you are positioned to apply for new cards (with sign-up bonuses) in the future.

If cutting our credit lines didn't impact how they compute our all-important FICO scores, I wouldn't mind so much.

If I have reasonable limits and sometimes use most of it, well, theoretically, so be it; it's reasonable. But do that and, despite my paying it off, isn't it going to kill my score? Even tho it's all been within a "reasonable" amount? Doesn't seem all so reasonable to me!!

phoebez said: I suggest that you do your own pruning instead of letting the banks choose which cards you keep.

If you have have 20 credit cards and only really need a few of them, then terminate the ones you don't need. That way, you make the choice for which cards to keep, not the banks.

The banks need to contract credit right now. It's part of the cycle we're in. Help them out.

Plus if you pare down the number of credit cards you have now, then you are positioned to apply for new cards (with sign-up bonuses) in the future.Or the opposite - leave all your accounts open, so each bank has some obvious options to chop at without really affecting you.

I'm not sure if there's any way to predict which lines the banks are going to cut if they decide they want to reduce your overall credit.

Obviously, the ones we want protected are the cards with the best rewards options and our oldest accounts. Beyond that, older is better to retain average account age.

Does this mean that you should try to ensure that your oldest and rewards lines are not your largest? Or should you reallocate to leave a bunch of small lines on your less important accounts, and let them close all of them at once?

Problem is we don't know whether the banks are going to try to cut back on the number of lines, or the total credit, or cut based on account type. Maybe they run the numbers and decide they want to reduce your total credit by 15K, and then just cut whatever account has a limit closest to it.

Unless we find out what the criteria are going to be, we can't try to work around them. The best plan is probably to sit tight, and if they do close an account you want to keep, call up and try to negotiate to reopen it (offering to cancel other cards, reduce limits, whatever it is that they are trying to accomplish). I would suggest watching out for your award redemption limits. Pull the rewards out as often as you can, so you don't end up losing out on reward points if accounts do get closed.

phoebez said: I suggest that you do your own pruning instead of letting the banks choose which cards you keep.

If you have have 20 credit cards and only really need a few of them, then terminate the ones you don't need. That way, you make the choice for which cards to keep, not the banks.

The banks need to contract credit right now. It's part of the cycle we're in. Help them out.

Plus if you pare down the number of credit cards you have now, then you are positioned to apply for new cards (with sign-up bonuses) in the future.Not a good idea. We dont know and cant predict what action the banks will take. One metric may even be to look at how many closed lines from other issuers someone has as a sign of risk. Dont proactively close anything.

I agree the only concern I have is how this affects FICO scores. I would hope issuers and Fair Isaac are considering another FICO revision. Unless, I suppose, they think those of us with a large number of unused credit lines have been higher risks than previously thought.

There is a flipside, no? I always get dinged because my outstanding lines of credit are too high, and because I have "too many" accounts. Presumably, I will be seen more favorably if I have less credit and less accounts. My utilization is completely voluntary so I can reduce utilization at any time.