Credit Card Users Hit for Doing the Right Thing?

Obviously, using defaults as a barometer, mortgages and credit card lines have been given out to many without the wherewithal to pay. This is the major reason for the recent financial meltdown. Whether or not the "follow me down" policy is the correct remedy, I cannot determine, but it just doesn't seem right.

Excerpt: Instead, the San Antonio resident claims that paying down his balance was rewarded with a cut in his credit limit from $12,300 to $1,900. The 85% reduction left him just $400 in available spending above his outstanding balance.

Sound unusual? Not these days. In fact, it's become so common that industry observers even have a name for it.

"We call this phenomenon 'follow me down,'" says Linda Sherry, director of Consumer Action, a nonprofit advocacy group based in Washington. "In the fallout over the economy, there's been a recognition that there's too much easy credit out there."

Throughout the credit card industry, spending limits are on the way down. While issuers avoid reducing limits below outstanding balances, your card company may decide to leave you with only a few hundred dollars in leeway. The result is that some consumers are left feeling as if they're being punished for doing the right thing. Read ABC News article here.