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The Water Cooler
General Discussion
Credit card limit cut in half.
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<blockquote data-quote="-Pjackso" data-source="post: 3373641" data-attributes="member: 8119"><p>It seems these sort of things (CC companies reducing credit limit) only happens in the bad times. After all - isn't a 'credit-limit' the entire purpose of their business plan? I remember this happened to me in the '08 crash also. </p><p></p><p>I always thought the (CC) banks have to maintain a certain ratio of (physical $) versus (leveraged $). </p><p>(i.e. for every $XXX dollars leveraged as credit (your credit limit) they have to balance it with $YY physical cash in the vault.)</p><p></p><p>To the bank, your credit limit is a potential debt on their books - even if you don't use the credit card.</p><p>So if they only have a finite amount of (cash-on-hand), then another way to meet the ratio is to reduce available leveraged $ - i.e. reduce your credit limit.</p><p></p><p></p><p>If this is correct - is it fair to think, the banks are hurting with cash-flow?</p></blockquote><p></p>
[QUOTE="-Pjackso, post: 3373641, member: 8119"] It seems these sort of things (CC companies reducing credit limit) only happens in the bad times. After all - isn't a 'credit-limit' the entire purpose of their business plan? I remember this happened to me in the '08 crash also. I always thought the (CC) banks have to maintain a certain ratio of (physical $) versus (leveraged $). (i.e. for every $XXX dollars leveraged as credit (your credit limit) they have to balance it with $YY physical cash in the vault.) To the bank, your credit limit is a potential debt on their books - even if you don't use the credit card. So if they only have a finite amount of (cash-on-hand), then another way to meet the ratio is to reduce available leveraged $ - i.e. reduce your credit limit. If this is correct - is it fair to think, the banks are hurting with cash-flow? [/QUOTE]
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