chase credit limit decrease

[longtimelurker]

Not sure where the 4.5% gain comes from (the interest he pays back?  Can't count that as a gain as he is paying it), but in general this is a classic short-term/long-term type issue.

If you have a sizeable 401K, lots of short terms problems can be solved by taking money out, either as loans or withdrawals, and in this case, if the OP has enough, this could replace, as you suggest, some sizeable credit card debt with a much better rate of repaying the loan back (often over 5 years).    But the fear (at least from the investment banks that don't want you do to this!) is that you have massively reduced the funds available to you at retirement and now face a bleak future when you are old of living off outdated cat food you manage to beg from the supermarket (if you are lucky!)  So from their point of view, sort out the present problem by cutting spending, paying off as much as you can and just live with the reduced credit limits, even if they balance chase you, because outdated cat food is pretty nasty stuff.

The truth probably lies somewhere in between, a smallish loan then applied to the highest APR card, might be enough to tip the balance, enabling OP to pay off the cards and still eventually have an OK nest egg for later life.

But really speak to a professional.  Although everyone here knows that credit is important, funds for retirement are probably even more so.

[ezdoesit]

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@longtimelurker wrote:

Not sure where the 4.5% gain comes from (the interest he pays back?  Can't count that as a gain as he is paying it), but in general this is a classic short-term/long-term type issue.

If you have a sizeable 401K, lots of short terms problems can be solved by taking money out, either as loans or withdrawals, and in this case, if the OP has enough, this could replace, as you suggest, some sizeable credit card debt with a much better rate of repaying the loan back (often over 5 years).    But the fear (at least from the investment banks that don't want you do to this!) is that you have massively reduced the funds available to you at retirement and now face a bleak future when you are old of living off outdated cat food you manage to beg from the supermarket (if you are lucky!)  So from their point of view, sort out the present problem by cutting spending, paying off as much as you can and just live with the reduced credit limits, even if they balance chase you, because outdated cat food is pretty nasty stuff.

The truth probably lies somewhere in between, a smallish loan then applied to the highest APR card, might be enough to tip the balance, enabling OP to pay off the cards and still eventually have an OK nest egg for later life.

But really speak to a professional.  Although everyone here knows that credit is important, funds for retirement are probably even more so.

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I was adding the 4.5 because I would think it is a gain because he is paying himself back with it.  After your reply and thinking it through I agree with you because it can't be a gain if he is paying back himself with his own money.  I would suggest he do this only if his he has a sizable 401k.  If he never brought it up himself I would never suggest it out of the blue.  Like you said speak to a professional. 

If I were him I definitely would not take out a personal loan for the debt like some have suggested.  That certainly is not going to make creditor feel more comfortable to pay off CC debt by incurring personal debt.  On manual review they would notice him not paying down debt but just moving it around.  I read posts on here where people were declined for that very reason.

[improvingmycredit]

it is interesting that individuals find consolidating the debt to better manage it is not wise.  

Why is this?  Making numerous minimum payments on several cards is literally not reducing the debt load but minimally.  One is barely paying the interest much less the principle except on the one card that the payment is increased to move the debt load lower... all the while all the other cards are continuing to stay at the same utility.

Moving all one's debt to a single payment that is manageble and has a clear end in sight typicaly (36 months) not a reasonable altermative?  Not only will it completely lower the utility of all cards to 0%.. but it lessens the likelihood of other lenders following suite with AA.  Can someone chime in on this? Thanks 

[Revelate]

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@longtimelurker wrote:

Not sure where the 4.5% gain comes from (the interest he pays back?  Can't count that as a gain as he is paying it), but in general this is a classic short-term/long-term type issue.

If you have a sizeable 401K, lots of short terms problems can be solved by taking money out, either as loans or withdrawals, and in this case, if the OP has enough, this could replace, as you suggest, some sizeable credit card debt with a much better rate of repaying the loan back (often over 5 years).    But the fear (at least from the investment banks that don't want you do to this!) is that you have massively reduced the funds available to you at retirement and now face a bleak future when you are old of living off outdated cat food you manage to beg from the supermarket (if you are lucky!)  So from their point of view, sort out the present problem by cutting spending, paying off as much as you can and just live with the reduced credit limits, even if they balance chase you, because outdated cat food is pretty nasty stuff.

The truth probably lies somewhere in between, a smallish loan then applied to the highest APR card, might be enough to tip the balance, enabling OP to pay off the cards and still eventually have an OK nest egg for later life.

But really speak to a professional.  Although everyone here knows that credit is important, funds for retirement are probably even more so.

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Repaying the 401K loan comes out of post-tax money; plus the time value of the money which is out on loan rather than accuring additional earnings.

Depends how short term the issue is which is a factor of income, but 401K loans are something I view as a last resort.  I'll wind up moving out of California if I can't purchase a home without dipping into my retirement accounts.

Promotional balance transfer, or take out an equity loan on some asset, house, car, or financial instrument.  If one could find a way to take a loan out secured against the assets in the 401K that could be brilliant, but directly from it via the usual 401K policies are bad mojo unless everything else is out of the question.  If the OP's done it before, I'm assuming he can do it again if he's not too heavily leveraged... look into a family loan too if it's available, haven't checked lately but I suspect the mid-term loan rate dictated by the IRS is still under 2%, and really you could do 0% at 13K under the gift maximums and that ameloriates your debt quite tidily... but make certain to setup a schedule and even I'd recommend documenting the loan and then paying it back under all circumstances.

[compassion101]

I've seen it passively mentioned but not directly, but the absolute first thing you must do is create a budget. Monthly income vs. monthly expenses. No amount of consolidating, BTs, loans, etc will do any good till you have a budget in place that provides more income than expenses. Include your CC interest payments (and any monthly charges, of course, if you still use them) as expenses. Don't  include payments against the principle as expenses. Do you have a significant surplus of at least say 500-1k/month? If not, you need to cut expenses, or increase income, or consider bankrupcy, in that order. I mention bankrupcy not because I think it is a good solution, but because it is going to happen eventually if you don't have a surplus and can't either cut expenses or increase income, and it's likely to be cheaper to do sooner than later.

Only after you have the budget in place, then take interest rates you are paying and compare them to less expensive ways you can possibly get money such as BTs and loans. As far as borrowing against your 401k, I'd figure you lose the 6-7% interest you are likely making plus another 4.5% on the loan, so compare an estimated 11% against other loans.

[unc0mm0n1]

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@jlfce1 wrote:

@s_rob7488

Clearly from everyone's responses it appears that you now know the reasoning behind the CLD. 

I'm sorry this happened to you.  This happened to me too, but with Citi.  I think this board is helpful when people stop pointing fingers and just help educate. It took a lot for you to come forward to share your experience so I'm sure it's discouraging to have all the finger pointing.

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But then how could the people on the board make themselves feel better? I think there are a lot of people on this board who offer great advice and truly try to help people. But their is another contingent that is here to belittle and show everyone how much better they are. People who come on here seeking help don't need 15 lectures from strangers on the internet. They need help. I don't see how telling him how horrible he is helps anything. He's in the situation now and needs to find a way out. Unless you have access to a time machine I don't think advice like "you should have never gotten into this situation in the first place" helps anyone. Just my two Lincolns. 

[CreditScholar]

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@enharu wrote:

Basically, I have to agree with what everyone has said. You need to keep your finances in check. 

You ought to be worrying more about your financial situation than what Chase is doing to you.

Anyhow, rather than to lecture you about how you had mismanaged yourr finances, this is what I recommend you do:

Right now, Chase is balance chasing you. Other lenders WILL notice this CLD and they might take AA against you as well.

Unless you can somehow pay down most of your debt, chances are Chase will CLD you again after you pay down your Chase card balances. To try to prevent that from happening again, call Chase recon tomorrow. Chances of you getting your original CL back is slim, so your priority is to prevent them from decreasing your CL further.

After you're done calling Chase, look through all your APR rates on each card. I understand you want to pay down your Chase balance ASAP, but chances are they will balance chase you again after you do it, so your utilization will be always near 100% for Chase. Right now your 2nd priority is to prevent other lenders from taking adverse action against you. Not to sound gloom but your relationship with Chase right now is pretty much a lost cause.

Pay down the HIGHEST APR first, and then go pay the 2nd highest APR card. If any of the stuff you bought can be returned, now is the time. You probably dragged those high balances for quite some time in order to get AA. You got to stop buying things that you obviously cannot afford.

Oh, and if you have any UR points, redeem them for CASHBACK NOW and use it to pay your debt. Don't even think about redeeming it for a holiday or any trip. That's the last thing you need right now.

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+1. This is perhaps some of the best advice I've read in quite awhile.

Enharu is correct in that Chase will likely balance chase you down to 0, and that your relationship with them is pretty much dead. They don't want to cut you off immediately since they can't repo what you've already charged, but they also want to make sure that you're unable to charge any more than you already have by CLDing you every time you pay a bit off. Essentially they're cutting their losses.

The other thing you need to keep in mind is that once the CLDs show up on your CRs, your FICO will tank since it'll report both Chase cards as being maxed out. Other lenders will see this, and expect additional AA to follow. You're about an inch away from having the entire house of cards come down on you if you're not careful.

The other thing that gets me is this: why is someone taking ANY vacation with this level of financial trouble? Unless it's a wedding or funeral, it just doesn't seem like a wise move at all.

[CreditScholar]

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@unc0mm0n1 wrote:

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@jlfce1 wrote:

@s_rob7488

Clearly from everyone's responses it appears that you now know the reasoning behind the CLD. 

I'm sorry this happened to you.  This happened to me too, but with Citi.  I think this board is helpful when people stop pointing fingers and just help educate. It took a lot for you to come forward to share your experience so I'm sure it's discouraging to have all the finger pointing.

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But then how could the people on the board make themselves feel better? I think there are a lot of people on this board who offer great advice and truly try to help people. But their is another contingent that is here to belittle and show everyone how much better they are. People who come on here seeking help don't need 15 lectures from strangers on the internet. They need help. I don't see how telling him how horrible he is helps anything. He's in the situation now and needs to find a way out. Unless you have access to a time machine I don't think advice like "you should have never gotten into this situation in the first place" helps anyone. Just my two Lincolns. 

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Because some people will do the same thing more than once.

If something (regardless of whether it's credit-related or not) is rationalized as an accident or plain bad luck, the behaviour is more likely to be repeated than if it's understood to be a deliberate choice with very negative consequences.

[s_rob7488]

So knowing that that's what Chase is trying to do, how can I make the payments on other cards and not have the AA on the other cards? My fico SW says now that my score is 643.....it hasn't ever been that low. Is there any good way to pay other balances or how should I go about paying the chase cards? 

I'll chose to ignore the comment on vacation. It was a belated honeymoon since my wife was ill for 2 months when we got married and I had already purchased airline tickets over a year ago that were paid for. We've just spent too much money. It hasn't been necessarily on just the vacation, we just need to get back to our budget and stick to it. 

[CreditScholar]

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@s_rob7488 wrote:

So knowing that that's what Chase is trying to do, how can I make the payments on other cards and not have the AA on the other cards? My fico SW says now that my score is 643.....it hasn't ever been that low. Is there any good way to pay other balances or how should I go about paying the chase cards? 

I'll chose to ignore the comment on vacation. It was a belated honeymoon since my wife was ill for 2 months when we got married and I had already purchased airline tickets over a year ago that were paid for. We've just spent too much money. It hasn't been necessarily on just the vacation, we just need to get back to our budget and stick to it. 

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Read what enharu said about this. He offered some pretty good advice.