Balance Chasing
Whenever credit cards are being discussed, the theme to The Godfather or Jaws should be playing in the background. Nothing seems to happen like it is supposed to. Balance chasing is just such an example. You reduce your credit card balance by faithfully paying your monthly bill and more. You see an ad for a trip to Jamaica. Airfare seems low. You need a vacation, and you have room on your credit card. Or...do you?
Balance chasing means that, as you pay your existing credit card balance down, the card issuer decreases the card's available credit. The card holder experiences a decrease in available credit rather than an increase by dutifully paying their balance down. The credit card company, to limit its risk, is limiting the amount of credit available on the card. Seems unfair, right?
Unfortunately, there is nothing you can do to prevent a credit card company from implementing this practice but pay off your credit or transfer the balance and move on.
Related or Semi-related Video
Finance: What is a Credit Limit?39 Views
Finance, a la shmoop. What is a credit limit? Alright people well simply put the
maximum amount you get to charge or use on a loan or credit account, that's a [Credit limit definition written on a 100 dollar bill]
credit limit. So yeah it's that thing that keeps toddler Joey from ordering
two hundred thousand dollars worth of Snickers bars. [Toddler looking at the snickers bar]
If you accidentally you know leave out your Amex. (Illustrative example time) If you have a ten thousand
dollar line of credit or credit card you can't spend $20,000 on a trip to Vegas,
sorry. You might be able to go on a smaller trip to Atlantic City but once [Picture of Atlantic City]
you hit that 10 grand well the party's over until you pay some of that money [$10,000 flashing in red]
back, and by the way taking that smaller trip and then putting everything on red [Chips landing on a roulette table]
22 in hopes of funding your next trip to Vegas? Probably not the soundest
financial planning... sorry, let's keep it real. [Guy putting on a serious face]
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