by Joseph Kenny | 01/15/09
Credit card companies have been hit pretty hard by the weakened economy. The blow from the mortgage industry's crisis has caused a ripple effect which left no market sector untouched in its wake of wanton destruction. Because of the nature of subprime mortgages hurting the banking industry with ferocity, numerous lines of credit have been slashed in order for financing companies to maintain their bottom line.
Card companies weren't saved from this effect, and likewise are reducing credit opportunities for their consumers in order to cut back on costs.
Even if you have great credit, you may not be saved from the effect of card companies reducing your credit line. There have already been numerous cases where cardholders have experienced lowered borrowing limits regardless of their credit scores. According to a fairly recent survey by Consumer Action, at least one in five individuals with credit cards have seen credit limit reductions.
A lowered credit limit can hurt some individuals financially, but it isn't ruinous for everyone. In fact, for those who find it hard to control their spending, having a lower credit line may actually help them curb their credit sprees. Nonetheless, those individuals should not depend on this as a means by which to stay out of debt. Even though card spending caps are being lowered, it's still just as easy as ever to get into debt by using plastic.
Credit cards are designed for convenience, so using them can help you achieve many things you normally couldn't do with cash alone or at least not as easily. You can purchase items online, transfer money, withdraw money, or make huge purchases nearly instantly by using a credit card. This has the side of creating hideously powerful opportunities for getting into debt.
Lowered credit lines don't mean that credit cards have lost their value. They are simply changing to meet the needs of a recession. Regardless of their limitations, they still remain a very worthwhile tool for people looking to make life more convenient.