Just read a story on Boston.com about how credit card companies have started a massive reduction in available credit. Essentially, the long and short of it is that to reduce the debt on their books and to lessen the chance that in these economic times someone may use a credit card with a large balance to cover expenses that they can't cover otherwise, they are starting to reduce the credit limits of many of their customers' cards.
I have two problems with this:
1. Many of these banks are the very same banks which received bailout funds from the government which was partially targeted with the purpose of easing their lending standards; not tightening them. This was supposed to increase the flow of credit, thus increasing the public's spending power and helping the economy to recover. This action is effectively the exact opposite of that.
2. A reduction in the balance of one of your credit cards could negatively impact your credit rating. Ultimately, if you have less credit available, you are therefore using more of your available credit when you carry any balance. Since the ratio of used vs. available credit is a factor in your credit rating...you see where I'm going.
I think it's the exact wrong thing to do right now, especially given that these institutions were just standing in front of the government, hats in hand, asking for money. Money that was supposed to help them increase the flow of commerce. Shame on them for taking it and then turning around and essentially exacerbating the problem. And shame on the government for this "blank check" that they've essentially written. Ultimately, the complete lack of oversight and control over how the money is used completely pulls the teeth right out of the bailout.
