My Way Credit

If you're the type to run your credit card debt right up to the limit, now is the time to beware: The credit crunch may be closing in on you. Credit card issuers are scaling back on credit limits, sometimes reducing the amount that consumers can borrow by more than 50 percent, according to the American Bankers Association.

And in some cases, the changes take effect overnight, with no warning. Joseph Lanza works for an investment firm in New Hampshire. When he left home for a weekend in New York City, he had a credit limit of $3,800, he told CNN.com.

By the time he got home, his bank had reduced his limit to $1,000 without informing him. And the charges from his mini-vacation had run his balance up to $970.

“It feels like I'm running up against a bunch of walls,” Lanza told CNN.

Javelin Strategy & Research reports that 62% of credit card issuers have reduced the lines of credit they offer to consumers. One reason for this credit crunch is banks’ growing discomfort over the mortgage crisis on Wall Street and Congress’s failure thus far to pass legislation that would buy up billions of dollars’ worth of banks’ bad debt.

Another reason, however, is that many consumers have proven they can’t afford the limits they do have. In the second quarter of 2008, 1.04 percent of credit card holders were delinquent on one or more of their cards, according to TransUnion, the credit reporting agency. That’s a modest decline in delinquencies since the first quarter, but still higher than average for this decade.

As a result, even consumers with great credit scores may pay a price.

“Credit lending standards are tightening across the board, it doesn't matter how great your credit score is,” Carol Kaplan, a spokeswoman from the bankers association, told CNN. “This is happening everywhere, to everyone.”

So here’s some advice to credit card holders (in other words, just about everybody):

• Monitor your credit like a hawk. Don’t wait for the monthly statement. If you haven’t created an online account with your credit card issuer, do so now so you can track your credit more often.
• Check your credit before you go on trips or make big purchases.
• Consider: Is this really the week you need the giant plasma TV with wrap-around sound?

Now that the bailout plan is floundering, what can we expect?

I just got off the phone with Kathleen Day, one of my heroes in Washington who has been fighting for homeowners with the Center for Responsible Lending, and she tells me that the problem is our legislators are just missing the point. Stopping the tide of foreclosures should be the most immediate effect of this plan, but right now it's way off in the distance. Without stabilizing home values now, we taxpayers (all of us!) get a double whammy:

Higher taxes and lower property values.

Meanwhile, some firms on Wall Street could stand to rake it in sorting out all the complex mortgage backed securities that our government may take over.

What a mess.

But it's not a done deal yet. Get on the horn, and let your Senators and Representative in Washington know how you feel about the bailout.

Now that the bailout plan is floundering, what can we expect?

I just got off the phone with Kathleen Day, one of my heroes in Washington who has been fighting for homeowners with the Center for Responsible Lending, and she tells me that the problem is our legislators are just missing the point. Stopping the tide of foreclosures should be the most immediate effect of this plan, but right now it's way off in the distance. Without stabilizing home values now, we taxpayers (all of us!) get a double whammy:

Higher taxes and lower property values.

Meanwhile, some firms on Wall Street could stand to rake it in sorting out all the complex mortgage backed securities that our government may take over.

What a mess.

But it's not a done deal yet. Get on the horn, and let your Senators and Representative in Washington know how you feel about the bailout.