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Banks Chasing the Balance

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Last Verified: March 22, 2023

Balance chasing is a practice that credit card companies use to minimize their risk when lending to borrowers who are risky. It involves reducing the credit limit on a credit card to just above your current balance, making it appear as if the customer has maxed out their card. This practice can have a negative impact on a person’s credit score because it increases their utilization ratio, which accounts for up to 30% of their credit score. This can be a one time occurrence or can happen continuously as you pay down the card.

People who have a significant balance on their credit card, which is not paid in full, or those who pay their balances too slowly are at a higher risk of balance chasing. Credit card companies are wary of slow payers because they assume that the customer is struggling financially. Therefore, it is essential to pay off the entire balance each month to avoid balance chasing.

If balance chasing does occur, it is crucial to act quickly to minimize the impact on your credit score. The best option is to pay off the balance ASAP. It is essential to remember that adding new credit could be difficult if you are already overextended. In this case, it may be best to focus on paying off the existing balances before requesting any new credit.

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Ken
Ken
5 months ago

Paying off the balance ASAP is completely useless as they will chase it all the way down to $100 rendering the account of nuisance to your credit profile.
Any account with a total credit limit less than $3,000 has a negative effect on your credit score. When a creditor reduces it down to amount so ridiculous you can’t even use the card it is best to cancel it all together.