How To React To A Credit Limit Decrease

Information verified correct on October 21st, 2016

My Credit Card Limit Was Dropped. Why?

There are a lot of different reasons that you might see a credit card limit decrease. The most often reason is that the user is being punished for risky credit card practices such as extremely large purchases, regularly pushing their limit, late or missed payment and others. This, however, isn’t always the case and sometimes it’s just s symptom of economic times. Particularly in times of economic hardship, lenders will seek to cut their losses. Of course, they’ll start with the worst credit card performers they have – those who do miss payments and everything else listed above – but when the hardship perseveres, they may have to take additional steps.

Often, the next step is to cut the limits of those who, though they’re not doing anything wrong, they’re not doing anything great either. If you fall in the average customer area, or you’re sitting on the line of an average and a good customer, you may find yourself a victim of these cuts.

Move Quickly

As soon as you are informed of the decrease in your credit limit, move quickly. Even more so if you’re near the limit that you’ve been dropped to. If you don’t act quickly, you may inadvertently trigger a full round of all the fees that you’ve worked so hard to avoid for so long. Take for example the person who had a $1500 limit and suddenly it’s dropped to $1000. This person has a $200 utility bill that they intended to use their card for, but no longer can. If it’s automatic, then it’s going to hit your card anyway and you can practically feel the force of the hit just thinking about it. Get on the phone or on the web and check all of your automatic payments to make sure that they need to be on the card, and remove the ones that don’t.

Time For A New Card?

If your credit limit is cut and there’s nothing you can do about it with your current card issuer, you might consider a new card. You want to apply quickly, though, for a couple of reasons. The first is the fact that if you get the new card quickly, your lifestyle won’t be interrupted as you have your new card on hand, when you need it. The second reason is that a cut in your limit could appear as a negative mark on your credit history – but it’s going to take some time to show up. Those few weeks could mean the difference between getting your card or not getting the card. The sooner you apply, the greater your chances of approval and a better limit!

Goodbye, Card Debt!

To free up the money you need on the card that you currently have, you need to make every effort to pay down the debt as much as possible. This will help you have more money on hand when you need it, and could make you more likely to get an increase (maybe even higher than the original) when it comes time to reassess your limit.

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