Is this a sure fire way to lower your credit score?

Sharon Lewis doesn’t think of herself as a deadbeat. She makes responsible financial decisions, which includes paying her credit card bills on time every month. So why is her credit score heading south?

Target apparently does think of her as a deadbeat. It recently rewarded her responsibility by slashing her credit limit.

“People who do business with Target and have a credit account with them should be made aware of this practice,” she says.

Target offers a line of credit and debit cards that are pretty standard. When you use one of the cards for select merchandise, you get 5 percent off your purchase. You can read more than you ever want to know about the card on its site, including its policies, which don’t look all that out of the ordinary.

Wait. I take that back. Actually, the kicker is the rates and fees: a 23.15 percent annual interest rate and late payment fees of up to $37.

And that’s how Target makes money. It can offer a 5 percent discount (or in the case of loyalty program affinity cards, lots of “free” miles) because it’s going to make even more money on late fees and interest.

Did she get a lower credit score by paying off her bills each month?

And when it doesn’t? Then you’re a deadbeat. Credit card companies consider you a deadbeat when you pay off your balance in full and on time each month, avoiding interest and late fees — and depriving them of all that revenue.

And that’s exactly what Lewis is — a deadbeat.

“I’m not one for using credit cards if I don’t have to, to keep my debt as low as possible,” she explains. “I have not used the card this year. I paid off the balance on time, in full, never late on a payment.”

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She says in retaliation, Target cut her credit limit from $2,000 to $200. That’s right, they knocked a zero off it.

“Because of this, I learned today that my credit score was reduced by almost 20 points,” she says. “I am outraged.”

Target denies it cut her credit because she paid on time.
“We reduce credit limits on our cards if they have not been used for an extended period of time,” Target spokeswoman Molly Snyder told me. “This guest reported that this was her situation. We do not reduce credit limits because a guest pays promptly or pays their full balance.”
How is a credit score determined?

According to the folks who create those credit reports, reducing your credit limit may lower your credit score. It may also raise your score. Who knows? A Credit score can rise and fall for a multitude of reasons. So for all we know, the reduction of her credit limit might have had nothing to do with Target taking a shot at her credit limit.

This I do know: Credit cards kinda suck. They punish responsible behavior and reward reckless spending. There has to be a better way to pay than this.

Lewis knows there’s not much she can do. “I want consumers to be made aware of this practice by Target,” she says.

Consider it done.

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Christopher Elliott

Christopher Elliott is an author, journalist and consumer advocate. You can read more about him on his personal website or check out his adventures on his family adventure travel site. Contact him at chris@elliott.org. Read more of Christopher's articles here.

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