Cut Your Spending Before Your Bank Does It For You!

Credit card providers are cutting credit limits for older customers but are still offering more cash to young people.

It seems that the credit crunch is starting to make an impact on Fools. We recently ran a Fool survey on credit card borrowing limits and we've discovered that the card companies are beginning to clamp down on borrowing.

One in eight Fools (12%) told us their limits have been cut -- by an average of 7% while 1% of Fools have had their cards cancelled.

OK, maybe these cuts aren't so surprising given the background of the credit crunch. It's understandable if banks are more nervous and want to reduce their levels of risk.

At least that's what I initially thought, but when I looked at the figures in more detail I was surprised. The credit card providers appear to be reducing credit limits for middle-aged people but are still increasing limits for youngsters.

In the 34 to 49 age bracket, one in six Fools say their credit limits have been reduced, but amongst the young (aged 18 to 25), two out of five young Fools have reported a rise in their credit limit. What's more, some of these increases have been as high as 50%!

I'm not just surprised by these figures, I'm a little worried too. Many students and young people have little experience of handling money and if their credit limits are increased they will just spend to the maximum limit, or more.  In my view, the high street banks have often lent in an irresponsible manner in recent years and I fear that little has changed, at least for younger customers.

Still, you don't need to fall into the banks' trap. If the spending limit on your credit card is increased, don't spend more! You'll still have to pay back the debt in the end and you may find that the banks cut your limit later on.  

The best approach is to ignore your credit limit and just repay all your credit card spending in full each month.

More: Five Top Ways To Clear Your Debt | The Debts That Wouldn't Die | Eleven Cracking Credit Cards