Credit Advice

Credit card companies do have the right to close accounts, change rates, or increase/decrease credit limits at their discretion based on the terms of use. In the future, the ways credit card companies can change these terms are being limited in the Credit Cardholder's Bill of Rights which is expected to take affect by 2010. Until then, these changes are completely at their discretion. This doesn't mean you are powerless. Here are a few things you can do to protect yourself against these actions:

1. Have multiple credit cards from different credit card companies.

Like in a stock portfolio, you need to diversify your access to credit. Don’t let one credit card companies’ lending rules affect all of your credit cards. People with good credit generally have 3-6 credit cards, so have options in the event one of your credit cards changes their pricing or credit limits. A credit union or a smaller bank is also a great option.

2. Have activity on your credit cards

As you suggested in your question, credit card companies are looking for ways to reduce their exposure to both cost and risk in this economic climate. If you are not using your credit card, you are both a cost and a risk in their eyes. Use your credit cards once every couple of months to show responsible activity and build good payment history. An easy way is to use it on groceries or gas, spending only on the essentials.

3. Use your credit cards in a consistent manner. As banks look to lower their risk exposure, they will look for the highest risk users first. Generally that means users who are using cash advances, showing large swings in balances, or unusual activity. Since we don't know all the triggers, don't make yourself a target and use your cards consistently and pay on time.