Question: Van, West Orange, N.J.
What can be done when a business credit line is suddenly reduced without warning based on the economic conditions of the country, and not on your credit history with the company?
According to the National Small Business Administration, more small businesses are using credit cards in lieu of lines of credit. Indeed, as bank lines of credit dry up due to the economy, credit cards are becoming a necessity for small businesses. Unfortunately, the same survey that found an increase in credit card use amongst small businesses also pointed out that credit card terms are worsening. On top of that, there has been a move to cut credit limits on a number of credit cards to reduce risk. The American Bankers Association says that some credit card lines are being cut by more than 50 percent. For a small business that relies on a credit card for capital, credit line reductions can be devastating.
However, it is possible to dispute your credit line reduction. In fact, if you have good credit and you are a good customer, this should be your first line of defense. Since credit card companies are required by law to notify you of changes to your credit line, you can try to reverse this action as soon as you discover your credit reduction. Call your credit card company and ask if you can avoid the credit reduction. If the customer service representative cannot help you, ask for a supervisor. Politeness is a must throughout the proceedings. Plead your case, pointing out that you have good credit and a good payment history with the company. Express your satisfaction with the company up to this point, and your hopes that the company can continue to meet the needs of your business. If your business is doing well (or at least not poorly), this is another point that you can use to bolster your case.
If the company is unwilling to reverse your credit reduction, consider looking for another card. LowCards.com, a company that provides credit card comparisons for consumers and businesses, says that even in this climate, for those with good credit there are some good deals to be found. And the launch of a federal program called TALF is meant to help get credit card companies lending again. Bill Hardekopf, CEO of LowCards.com, points out that up until now, “Credit card issuers also aren’t in a position to increase their lending. They are trying to stay afloat despite a growing delinquency rate that threatens to pull them under.” Changes could be coming soon, and that might mean more opportunities for you, with your good credit, to switch to a credit card more likely to meet your small business needs.
As a side note, if your credit line has been reduced to the point that you are automatically over your limit, make sure you dispute any fees charged on purchases made before the credit line reduction went into effect. You also can report abuses in this area to the Federal Reserve online.
However, should you decide to switch to another credit card, do your homework first. If you apply for a number of cards at once, you will damage your credit score and you may not get the credit you need. Instead, choose the credit card you feel is most likely to meet your needs and apply for it. As long as you have an established credit history, good payment history, and are using less than 50 percent of your available credit, you are likely to be approved for a new small business card.