CHESSNOID

Even though all the banks have received billions of bailout dollars to free them up from the “credit crunch”,  they are not extending credit and instead are doing the opposite.  The banks are not using the money for what is was intended for.  We know the banks and insurance companies have used the taxpayer dollars to pay out CEO bonuses ($20 billion!) even though their companies  were losing billions, throw lavish parties for their employees, and even remodel their CEO offices including a $35,000 toilet.  (Personally, they all should be arrested for fraud and their assets frozen until the money is recovered.  Obama needs to take some real action and keep his promise of change).

We know the credit card companies are cutting credit lines on all their customers across their entire portfolio.  It doesn’t make any difference if you have a high FICO score and never missed a payment, the banks just don’t want to have the risk there of possible defaults because they are losing so much money.  Smart Money:

One possibility is that this is yet another attempt by card issuers to get consumers to close their accounts (while bringing in a little fee income in the short term), says Dennis Moroney, research director and senior analyst for consulting firm Tower Group. “I can’t rationalize in my mind what other motivation there would be,” he says.

Paul Pensabene of Saratoga Springs, N.Y., received a statement from HSBC on Dec. 8 that said he had a $359.99 balance and remaining available credit of $8,640. But when he went online to pay the bill several days later, his online account showed that same balance put him over his newly-reduced credit line of $300. And that didn’t include the $35 over-limit fee. Pensabene grappled with customer service until they agreed to remove the fee, and then paid the balance in full. “All I could think was, ‘Good lord, what if this is happening to someone that couldn’t pay their balance off in one shot?’” he says. “They’d end up in default with these fees piling up.”

HSBC declined to comment on individual cardholder accounts. Spokeswoman Cindy Savio says the issuer has tightened its credit standards based on the economy. “As we have previously stated, in an effort to reduce credit risk and refine strategies for our card business, we have tightened credit standards, reduced or canceled higher risk credit lines, and closed a number of inactive accounts,” she says.

While the fees, frozen accounts and default interest rates resulting from credit-line cuts can sting your finances, they can do some serious long-term damage to your credit score. Your credit utilization ratio — the total amount of debt you owe in relation to the amount of credit available to you — accounts for roughly 30% of your score. A credit line cut has the potential to decrease your score by 50 points or more if you don’t have much other available credit, says Craig Watts, spokesman for FICO, the company that calculates and issues the credit score that most lenders use.

Even cuts that are close to the balance have the potential to devastate if they’re not caught quickly. Luckily for Carol Gressett of Decatur, Miss., she noticed the reduction in her Discover-branded Sam’s Club card limit just days after it happened. The limit was cut to within $100 of her $3,000 balance. The official letter notifying her of the reduction arrived three weeks later. “We could easily have gone over if I hadn’t been paying attention,” she says.

In my blog post of my personal experience with American Express over a year ago there are over 150 comments from other cardmembers sharing their experiences. All the same theme of high FICO scores, never late, good job, and plenty of available credit and without warning, their high credit limits are reduced to $500 or to their current outstanding balance. This action by Amex hurt people’s FICO scores within 2 months. Apparently, all the credit card companies are doing this even after receiving billions of bailout dollars. These banks should be allowed to fail and the taxpayer should not be forced to bail them out. It’s obvious our money could be put to better use and that is why most of us oppose the FRAUDULENT BAILOUTS!