Credit Cards
The Federal Open Market Committee, or FOMC, surprised us with by cutting the federal funds rate by 50 basis points after leaving it unchanged at the last three meetings. So what does this mean for you and your credit cards? Get conservative with credit card spending and aggressive with payments.
If you receive a small interest rate reduction, great. Regardless, now is the not the time to carry a large balance relative to your credit limit. "It's risky because all of a sudden you are setting yourself up to be assessed at a higher risk," says Bill Hardekopf, CEO of LowCards.com.
While the lower the balance the better, most experts recommend keeping balances under 30 percent of your limit. High balances can lower your credit score and trigger rate increases or credit limit reductions. Even if you pay off your card each month, the amount reported to the credit-reporting agencies is what matters. Depending on when the issuer reports, that amount could be your statement balance.
Learn smart strategies for paying down debt. Use our debt payoff calculator to compute how long you'll be making payments.
Also, the majority of credit card issuers are whacking credit limits, so make sure you know what yours is. "I think even if your credit is good, you're still vulnerable," says Curtis Arnold, founder of CardRatings.com and author of "How You can Profit from Credit Card."
Check your statement or call your issuer to find out what your credit limit is. If it gets reduced, call your issuer to complain.
That goes for any adverse action. Call your issuer to reverse unfair changes, citing your consistent payment history, longtime customer relationship or anything you can use as leverage. Shop around for a new card when that doesn't work.
Take-away
The best defense against tightening credit and uneasy issuers is a good credit offense. Reduce your balances, make payments on time and spend less than 30 percent of your credit limit, or lower.
-- Leslie McFadden