Credit Card Offer - Reduce Your Balance and Get a Reward

I got an interesting offer in the mail the other day from one of my credit cards. This is one that had already reduced my credit line down to just what I owed a few weeks ago. I had taken advantage of a previous offer to get a low interest rate if I transferred other balances to it. Since it was pretty max'd out it the credit line only went down $1,240 - strange number, huh? Basically the computer looked at what I owed and added enough for the next interest accumulation and that became my new credit line. I figured that if I pay-off any more of it they would probably reduce my credit line even further. So that that card has been getting the minimum payment, until the special interest rate offer expires.

The new offer from them is interesting...for the next 4 months they will match 20% of the amount over the minimum payment I make, up to $550. Sounds good, but the catch is that they will temporarily suspend the ability to charge on the account and at the end of the 4 months they will reduce the credit line by what I paid over the minimum plus the 20% they give me.

In my opinion this is a more reasonable way to get people to pay down their credit balances - give them a financial incentive and tell them up-front that they will also be lowering their available credit line. The other way, just lowering credit lines arbitrarily, leaves people without credit they may have been counting on to pay college tuition, etc. And many, like me, will quickly max out their available credit with a cash advance in order to make certain that money is available for upcoming expenses or "buffer money" for those unanticipated expenses.

For example this past spring our beloved dog unexpectedly collapsed while we were 3,000 miles away and was diagnosed with a very aggressive blood vessel cancer; they didn't expect her to survive the night. We put several thousand dollars on our credit card for transfusions, surgery, etc. in order to buy (literally) time for us to return home and spend a few weeks with her before she passed. For us, not having had that credit available would have been tragic emotionally.

The availability of credit in our society provides for flexibility; yes, it has gotten out of control and some people have used it to live beyond their means, but the random reduction of credit lines without any reason (late payments, etc.) puts more of a strain on people that are managing their credit. And in many cases it will have a backlash when people who have been paying down debt begin to save that money instead and pay only minimum payments so that they retain their ability to respond to unforseen needs.

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