Two articles I read recently seemed to be eerily prophetic about what happened to me recently when I did a balance transfer on one of my cards.

I normally do a little credit card arbitrage, to get the lowest rates possible. So when one of the credit card rates was set to increase, I did my normal little trick of moving it to one of the empty ones to maintain a low interest rate. I know this isn’t necessarily the smartest move for household money, but it’s an effective way to maintain a balance and still get a low interest rate. All told, doing this has kept me from paying more than 7% interest on any of my cards for years.

Anyway, I received a nice little balance transfer offer from Chase recently (3% up front, .99% for 6 months after that) and I had a balance on a card that had just moved to 18%, I decided to make the move. I calculated out how much I could move, including the up-front costs, and went online and moved the balances. No problem.

End of story.

Or so I thought. A few days later, I get a letter from HSBC, saying they’d lowered my (empty) credit card from a credit limit of $7000 to $305. And where did the $305 come from?!??

The letter had the standard blah blah about usage, credit record, and such. The one that caught my attention was the reason specified ‘The ratio of available credit to utilized credit is too high’.

Now, that’s true, on the one card I transferred the amount to. The OVERALL amount of available credit to utilized credit didn’t change at all. In fact, utilized credit has been going down steadily, as I’ve been in debt-killer mode these last couple of months.

It’s a Bad Bad Market Out There

Now I’m not particularly mad at HSBC. I haven’t used their card in the better part of a year, and I originally got the card because of the low intro rate for their balance transfers. It just goes to show that there are still more than a few banks out there that are scared of how things are going. Pulling in, and eliminating large available credit balances for customers is a way for them to keep themselves safe. Assuming they thought I was suddenly going to run up a huge amount of debt, then stiff them for the payments.

Ain’t gonna happen.

I’ve never (knowingly) missed a payment to any bill in almost 12 years. My credit rating should show that, and the banks and credit card companies should know that as well. It’s the banks that depend on a computerized algorithm to tell them whether someone is about to go belly up or not, that triggers these kind of cuts.

The one thing that does bug me about this is that I’m going to take a hit on the FICO score, because it will show a decrease in available credit vs. utilized credit. This doesn’t mean anything to me right now, but because getting new credit is becoming more difficult, this might cause me issues if I need to finance something relatively soon.

I’ve got paid off cars, a house within my means, and not that many bills left, so the odds aren’t too high. It’s just having the option to do something would be nice.

Have you had your credit limits reduced recently? We’d like to hear your stories and see if there’s a common thread or cause. Leave us a comment and tell us your story!