The Most ANNOYING Thing About Credit Cards

I like credit cards. I’m able to sleep well at night, because I do believe that using credit to pay offers a number of added benefits as opposed to using a debit card (which can be dangerous, and nets no rewards) or cash (hard to get a refund or dispute a transaction once you’ve handed that cash over).

Also, the CARD Act reforms wiped out some of the more egregious practices of the big card companies, so the credit card offers you see today are more or less very well-regulated, transparent, and benign so long as you pay down your outstanding balances on time.

With all that said, yesterday I encountered one of the lingering problems with credit cards — it’s an awful practice that the CARD Act should have addressed and eliminated.

Without any prior warning, I received an automated call from one of my credit card companies. The voice sounded like the malicious A.I. in Eagle Eye.

“She” informed me that, effective immediately, my credit line had been slashed from a tolerable $6,000 to a completely ludicrous $1,300.

As I had a bunch of transactions waiting to post from a recent business trip to Texas, it was almost certain that this action would put me unexpectedly over the “new” credit line, which today is exactly what appears to have happened. (I’ll be paying over-the-credit-line penalty fees now.)

I honestly don’t see how this practice is legal. Card issuers should be forced to guarantee your credit line size for a certain pre-determined amount of time, say 6 or 12 months, before it is either renewed or lowered at the bank’s discretion — all while giving you a few weeks’ notice so you can transition your spending onto other cards.

Luckily, I’m at home, and have plenty of other cards.

But if I had been travelling, and for some reason this was my primary card, their sudden decision would have proven disastrous for me.

Why did they do this in the first place? It was likely because my “risk” profile has been elevated: I missed a payment on this card when I was out of the country, and although I promptly paid and explained this to them when I got back to the U.S., you’re just a number to the banks. A risk portfolio, a part of the data mining algorithm. Their system thought “Missed payment equals risky deadbeat. Lower credit line immediately!”

Anyway, it’s their loss. I’ve already chopped up the card and plan to close the account after I bring it to a $0 balance. I don’t need a glorified gift card in my wallet — a $1,300 credit line is useless as a traveller.

This is what happens, I’ve found, more often with banks where credit cards are only a small part of what they do… their money comes from the trading desk, commercial lending, and mortgages — credit cards are an afterthought, so they leave all of the decisions to static algorithms, rather than to human credit analysts who would be able to see that one missed payment in 5 years does not a deadbeat make.

That’s part of the reason why I recommend Discover so frequently on my credit card reviews portal nowadays, and American Express as well.

Those are both true card companies; it’s in their DNA. They focus on credit card products primarily, and other services — such as online savings accounts — are the small side offering. Not the main business.

If an unexpected credit slashing has ever happened to you, feel free to commiserate in the comments section. 

— provided by Outlaw; read more about which credit cards I recommend (and don’t recommend).

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