Balance Chasing

What Is Balance Chasing?

Balance chasing is the practice by certain banks of lessening a customer's accessible line of credit as they pay down their credit card balance.

Understanding Balance Chasing

Balance chasing means that as opposed to opening up credit, the customer has less accessible credit due to the lower credit limit. A credit card issuer could participate in this practice to limit its risk by lessening the amount of a specific borrower's [available credit](/accessible credit). Balance chasing might be more probable in the event that the cardholder gives off an impression of being a high-risk borrower who makes late payments or defaults on other credit cards or loans. A potentially negative side-effect of balance chasing is that even however debt repayment is responsible consumer behavior, it can make it troublesome further develop a credit score, such a FICO score.

FICO scores consider five factors to decide credit value: payment history, current indebtedness, types of credit utilized, length of credit history, and new credit accounts. As a rule, payment history addresses 35% of the score, accounts owed 30%, length of credit history 15%, new credit 10%, and credit mix 10%. Payment history measures whether credit accounts are paid on time. Credit reports show payments for all lines of credit and demonstrate assuming payments are received 30, 60, 90, 120 or more days late. Paying on time generally will prevent balance chasing. Accounts owed in the FICO score alludes to total amount owed. High debt doesn't be guaranteed to mean a low credit score. FICO considers the ratio of money owed to the amount of credit accessible. Thus, the lower the percent of credit being used, the better it is for the score.

Balance Chasing and FICO Score

In the event that a cardholder gets the maximum on a $5,000 credit line, their credit utilized is 100%. Assuming they pay down that balance to $4,000 and the credit line stays at $5,000, then credit utilized drops to 80%. In any case, in the event that the credit card issuer pursues the balance and cuts the credit limit to $4,000 when they pay, the credit utilized stays at 100% and their credit score won't get to the next level. On the off chance that a cardholder keeps on making new purchases, they would should know about the allowed limit. Balance chasing could bring about a surprising drop in the maximum allowed and cause subsequent purchases endeavored with a card to be declined at point of sale. Assuming the cardholder picked in to overlimit fees, new transactions could be approved yet with fees charged for surpassing the credit limit.

Assuming you're feeling restricted by balance chasing and searching for another credit card, however wish to try not to pay an extravagant amount of fees to transfer balances, there are balance transfer cards accessible that might suit your necessities.