Two Credit Card Quandaries, Solved

Two readers, both dissatisfied with their credit card companies but for different reasons, recently wrote to me. Here's the first problem:

I just received a notice from Capital One that my credit limit is being cut from $17,000 to $9,100 because I 'have not taken full advantage of [my] credit line.' I pay my account in full each month, though in the past couple years I have floated some bigger ticket items like new carpeting and living room furniture. Why did they do this, and will it negatively affect my credit score?

And the second:

About a month ago, I called Citibank to close my account. They offered to lower my rate to 1.99 percent until January of next year to keep me. (It had been at 8.74 percent.) This past weekend, I got a letter saying that they are changing the terms of my account and raising the interest rate to 13.99 percent. I have never missed a payment, nor been late or taken on new debt. When I called Citibank, they said that they will keep the promotional rate in effect until January, as previously agreed. Have you heard about this from anyone else?

Since I recently spoke with Curtis Arnold, author of How You Can Profit from Credit Cards, for an upcoming Alpha Consumer podcast, I put the questions to him. Regarding the slashed credit limit, he says that he has been hearing from more consumers about this, and he thinks issuers are likely reducing credit limits to minimize their own exposure to rising delinquency rates. "Cutting a cardholder's credit line doesn't typically create the negative publicity that rate jacking does so more issuers are using this tactic," he says.

Arnold recommends calling to complain because a reduction in your credit limit could, as the reader fears, hurt her credit score. Credit scores are based partly on the utilization rates of consumers' current credit limit, so a decrease in the limit means an increase in utilization—and a decrease in score.

For the reader with the spiked interest rate, Arnold says she made the right move by opting out, but he recommends first calling the company to threaten to close the account in order to emphasize how upset she is. "Card issuers don't want any negative publicity, particularly in light of the proposed reforms to the industry, so your reader can use this as leverage," he says. (He also suggests checking on Citibank's new policy, which limits when it will raise rates.)

The bottom line: If you're not happy with how your credit card company is treating you, then call to complain. You might get a better deal.