Good credit score of a consumer cannot prevent credit limit cuts

In the fourth quarter of 2008 about 45% of U.S. banks reduced their credit limits for new or existing credit card holders and the financial institutions continue to further tighten and severing conditions for their customers. Irrespective of the credit score of a consumer American Express, Chase and Citi are cutting credit limits.

“You’re no longer immune if you have good credit,” said Curtis Arnold, the founder of CardRatings.com, a Web site that reviews credit cards. “The issuers hold the cards, literally.”

Customers know that credit-card issuers like American Express, Citigroup Inc. and JPMorgan Chase & Co. are reducing credit limits in a move to protect themselves against risk and prevent delinquency and charge- off rates from increasing.

According to Desiree Fish, a spokeswoman for American Express, the key factor for the company to decide to cut the credit limit was consumers’ overall debt levels relative to their financial resources.

As for Citigroup it explains its credit limit reduction by the market environment and deterioration of consumer credit.

As CardRatings.com notes those cardholders with large balances, delinquent payments or recent dips in credit scores will most likely have their credit limits lowered. Besides, those consumers who use their cards very seldom will also be cut on their credit limits as long as such cardholders are view as unprofitable for the companies.