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By G. Steven Bray
Before you use your tax refund to pay down your credit cards, here’s something to consider. Your financially responsible action just might hurt your financial situation.
I’ve seen this happen before, and it’s really frustrating. You’ve been carrying a large credit card balance, slowly paying it down, padding the bank’s pocket with your interest payments. You get a nice tax refund and decide to be financially responsible. You use it to pay off half the card balance, thinking it will boost your credit score. Instead, you get a letter from the bank saying they’ve cut your credit limit to just a couple hundred dollars more than your new balance. You’ve done nothing for your credit score because the card still appears to be maxed out, and you’ve lost spending power. What a deal!
So, what can you do? You can try to contact the bank and explain why your financial situation has improved. It may reinstate the limit. It might raise it, but it probably will do nothing.