Comments on: Credit Limits Going Down

By: Melaniesd

Melaniesd — Fri, 10 Oct 2008 23:58:12 +0000

Jennifer, were you asking to secure the line of credit agains’t the car you are purchasing? I haven’t heard of a set up fee for a unsecured LOC either.

By: kristin

kristin — Fri, 10 Oct 2008 15:58:23 +0000

also, keep in mind what a ‘good borrower’ is. your definition and the banks definition are totally different. someone who keeps a low limit and pays off their balances is NOT a good customer. they make them no money. so if you find yourself confused, it’s because you are thinking of them as a person, and not a self feeding corporation.
if you want to watch a neat documentary about money, watch zeigeist and the sequel zeitgeist-addendum (esoteric agenda is good too, but focuses more on world stuff and food supply). they are the number one watched movies on you tube now. it talks about the origins of the money system in the states. pretty neat.

By: admin

admin — Fri, 10 Oct 2008 15:50:44 +0000

Angela, you did a good job with that explanation.

Jim, the money that the banks lend us comes from one of two places:
a) the deposits we give them, and
b) money they borrow.

If they borrow a buck at 4% and lend it to us at 6%, the difference, called “the spread” is their profit. When the Bank of Canada lowers it’s rate, the banks can borrow for less. Sometimes they pass it on to us to keep us borrowing. Sometimes they don’t.

Recently, with there being less money available — the liquidity crisis — banks have been paying more to borrow. But they have not been passing all their increased costs on to us because they were afraid to scare away the borrowers with too-high rates. Instead, their profits have been taking the hit.

Now there’s no more manouvering room. We don’t have enough money to cover all the credit that’s been extended. We’re up the creek without a paddle. And some of our boats are springing leaks.

By: Marie

Marie — Fri, 10 Oct 2008 15:35:09 +0000

Jennifer:
I don’t remember any set up fees on unsecured LOC. I heard of fees for secured if you use your mortgage as collateral (fees in the range you mentioned). Shop around.

By: J

Fri, 10 Oct 2008 02:00:03 +0000

I’m pretty sure mortgages are callable too, which is slightly scary. I know I’ve heard of mortgages being called in the past. Just another reason to get that sucker paid off too.

By: Angela

Angela — Thu, 09 Oct 2008 22:45:36 +0000

Gail, if you would allow me to answer Jim’s questions…

Lowering the bank rate has nothing to do with reducing credit limits. Credit limits have to do with the willingness of the banks borrowing money to the credit card holders. If the banks don’t want to borrow so much money out to the credit card holders anymore, they would reduce our credit limits.

The bank rate has more to do with people who already owe money. By lowering the interest rate, it should encourage people to keep up with their payments. By decreasing the monthly payment, the payment amount would decrease as well. More and more people find themselves not able to keep up with the payments because other costs of living (e.g., gas, food) have gone up as well. And since their wages might not keep up with all those increasing prices, some peole find that they suddenly cannot afford to make their monthly payments. So, if you decrease their monthly payment by decreasing the interest rate, they would suddenly find themselves able to afford the payments.

Poeple who don’t have the money in the first place should have never got a loan or used their credit cards at the beginning. It’s too bad that banks, often time in the past, approve loans for those people.

By: Jim

Jim — Thu, 09 Oct 2008 22:15:37 +0000

Gail, I’m still confused.

How does lowering the Bank rate trigger banks to reduce credit limits on their cards?

Secondly, how do the central banks think that a lower bank rate will solve the problem? Is the problem a liquidity crisis (I have heard it called this)? What is a liquidity crisis? As I understand it, people do not have money to pay back their loans. How does lowering the interest rate help people pay back their loans if they don’t have the money to do it in the first place?

You’re right – I don’t know how the financial system works, and as events unfold it becomes more and more of a mystery to me.

By: ~K.

~K. — Thu, 09 Oct 2008 21:59:59 +0000

Goal “0″ Debt > There’s no doubt that if you use your cards wisely, pay the balance off in full and the CC doesn’t cost you anything… they are a great tool. I’m using my points from a CC to redeem for gift cards that I’ll use to buy gifts for people this Christmas. But if you ever pay any money in interest or fees… it’s not such a good plan anymore.

By: Goal "0" Debt

Goal "0" Debt — Thu, 09 Oct 2008 21:27:10 +0000

Is it not true that credit cards can also be a great tool? I use mine for big purchses grab the points towards the grocery bill and pay it off as soon as the bill is due. 6 weeks grace using their cash and leave mine in the bank.

By: admin

admin — Thu, 09 Oct 2008 19:50:23 +0000

ib, no notice is required. most agreements say, “subject to change without notice.” g

By: Arma_Geddon

Arma_Geddon — Thu, 09 Oct 2008 18:43:46 +0000

This will not be limited to credit card balances. As the financial crisis unfolds, we will see home equity lines of credit, personal loans, car loans, business loans, and even mortgages called, all the while jobs are lost, companies close and unemployment soars.

Who knows what the future holds? As well as bonds, the government may issue food coupons, slash unemployment payments; provinces may make work mandatory for welfare recipients, or cut benefits altogether; cities may just stop removing snow or collecting garbage because they can’t pay their employees, just like the state of California at the present time. The same mess experienced in the US will catch up north of the border and everywhere else on the planet.

People in debt used to eating out may very well have their next meal out in a church basement. At least, it will be free.

By: K

Thu, 09 Oct 2008 18:19:22 +0000

I know that this has less to do with achieving ideal credit terms, but I just came across this in the Globe and Mail that was interesting about married couples and having a complete picture of their finances. Certainly an interesting read that should get a few butts in gear.

http://www.theglobeandmail.com/servlet/story/RTGAM.20081009.wlgenex09/BNStory/lifeFamily/home

By: jennifer

jennifer — Thu, 09 Oct 2008 18:04:31 +0000

I am threatening to vote with my feet. The best deal they would offer me is to increase my unsecured credit line and reduce the interest by 0.25% for a grand total of prime +1.75% ( gee-thanks a lot) So I called ATB financial- guess what? $339 set up and prime -0.51% for the first year. Appointment on Oct. 18- Sounds much better to me!

By: Tracy J

Tracy J — Thu, 09 Oct 2008 17:47:38 +0000

oh my. I just cruised the web for ecomic headlines around the world. Wow, no one is immune to this! Banks are being bailed out by their governments all over this lovely planet.
I think I will keep my head low, keep my balances zero as long as I can and hold onto my diversified RRSP the way it is (appalling just appalling!!) for now.
Hunkering down for the storm with some canned food (don’t forget the canopener), and a good supply of candles — metaphorically speaking — is the best way to go, I think.

By: ib

ib — Thu, 09 Oct 2008 16:23:29 +0000

Gail,

Does the company have to notify you when your limit is going down? How much of a notice will they give you?