Armed with a brand new college diploma, a burgeoning company, and a $20,000 credit limit on his business card, Charles Brown – the 22 year-old owner of a small entertainment business in Richmond, VA – was well on his way to building his business. That is, until his credit limit dropped. "I went to make a business purchase this past November and my card was declined," recounts Brown. "American Express dropped by credit limit from $20,000 to $800 overnight." Brown isn't the only one coming up short on credit. As interest rates rise and credit limits across the country plummet – even among the best credit holders -- an increasing number of Americans are struggling to hang on to their current credit card terms.
Here are eight ways to safeguard your cards:
1 - Balance your balance
After calling his card issuer, Brown was informed that he lost his credit limit, in part, due to the fact that he had held a revolving balance of $5,000 to $6,000 every month for the past three years. While holding a credit card balance under 30 percent of your credit limit shouldn't identify you as a risk, young card holders and those with poor credit history have a higher chance of hanging on to their current credit terms if they keep their debt below the 20 percent mark.2 - Spread the debt
Those at risk of going over the 30 percent mark may want to consider splitting the debt onto two cards says Becky Palmer, education director for the Consumer Credit Counseling Services of New Hampshire and Vermont.
"Consumers are better off spreading their [debt] balance over different cards than accumulating all the debt on one, but it all depends on your credit history" says Palmer. "Seeking too much credit will create inquiries in your credit history, which in return will hinder your score."
Palmer recommends dividing debt up between two cards only as long as the consumer pays off both cards each payment period. If debt looks like it's beginning to spiral out of control, she advises consumers to consolidate debt back down to one card and focus fiscal resources on paying it off fast.