Has Your Credit Card's Limit Been Cut? Here's What to Do
by Lyle Daly | Updated July 21, 2021 - First published on Sept. 30, 2020
Your credit limit plays a large role in your credit score. If a card issuer cuts your credit limit, it's important to take action.
You've just checked your credit card account and gotten unwelcome news -- the card issuer cut your credit limit.
This isn't common, but it is a move credit card companies make often during times of economic uncertainty. The COVID-19 pandemic certainly qualifies, and some credit card companies have cut credit limits in recent months.
When the credit limit on a card gets reduced, there are a few steps you should take to minimize its impact on your credit score and your life.
Contact the card issuer
With luck, you can resolve the problem in one step. Reach out to the card issuer. The best option is to call customer service at the number on the back of your credit card, but you can also go online and see if there's a chat or secure message option.
When you're connected to a representative, ask if your credit limit can be reinstated. Some consumers have reported success. Although it's not guaranteed, it's worth trying before you do anything else.
Check your credit score
The primary issue after a cut to your card's credit limit is what it does to your credit score. Credit limits don't directly affect your credit score, but they do determine your credit utilization ratio, which has a large impact on your score.
Credit utilization is a measure of the total balances on your credit cards divided by the total credit limits on those cards. Low credit utilization is good for your credit score -- 20% utilization or less is optimal -- and high credit utilization is bad for your credit. Obviously, if your balances stay the same and one of your credit limits gets lower, that causes your credit utilization to go up.
You should review your credit score to see whether it has dropped from your credit limit cut. Keep in mind that it may take up to a month before you see changes. Credit card companies generally report cardholder balances and credit limits monthly.
Be mindful of your credit card balances
Depending on how much your credit limit was cut, you may need to adjust your spending habits. There are two things to watch out for:
- You could max out the lower credit limit. If that happens, any transactions that would put you over your credit limit will be declined or you'll be charged an over-the-limit fee if you previously agreed to that.
- Your typical spending will result in a higher credit utilization than before, since your credit limit went down. That's not a big deal if your credit utilization goes from 5% to 8%. But if your credit limit was cut quite a bit and your utilization goes from 20% to 50%, that will impact your credit score.
As you use your credit cards, keep an eye on your balances so you don't use too much credit or get close to your new credit limit. And if you feel like you need more credit, there's a simple way to get it.
Consider applying for a new credit card
Even if you can't get your old credit limit reinstated, you could apply for a new credit card instead. Another credit card can help if your current credit limits aren't enough to comfortably cover your regular expenses. It can also lower your credit utilization, because its credit limit will be added to your existing credit limits. If you want to add as much credit as possible, high-limit credit cards are an excellent choice.
Another option would be to ask for a credit line increase on one of your current credit cards. Most card issuers let you do this online, but you can also call in to request it.
Navigating a lower credit limit
A cut to your credit limit is inconvenient and potentially frustrating if it affects your credit score. There are plenty of ways to fix it, though. You may be able to get your credit limit reinstated just by asking. If that doesn't work, and the lower credit limit is an issue, use this as an opportunity to open a new card with benefits that you like.
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