Can Credit Card Issuers Lower Your Credit Limit Without Any Notice?

Card issuers often surprise their customers by launching exciting offers or by increasing their credit limit without any prior notice. A sudden decrease in credit limit can also be a surprise for some of their cardholders which may lead to a financial crisis for them. Many of you might have experienced a reduced credit limit without any warning and you are not the only one. Card issuers often decrease the credit limits of their customers due to a lot of reasons. This may sometimes happen when you didn’t expect it at all so you must know what to do in such situations. This article is here to help you understand the reasons for a sudden decrease in credit limit and what to do to get back a higher limit.

Why Do Card Issuers Reduce Your Credit Limit

There can be a lot of reasons why your card issuer decreased your credit limit all of a sudden. It might have happened due to your payment behavior or someone else’s payment behavior affecting your credit score. Sometimes your limit is reduced just to minimize the risk even when you manage your card very well. Following are some of the major reasons behind a reduced credit limit:

High Credit Utilization Ratio

If you use your full credit limit or most of it every month, you might seem to be a risky borrower to the card issuer as utilizing most of your credit limit affects your credit score negatively. In order to be a responsible credit cardholder and to achieve a high credit score, it is advisable to use only 30% or less of your credit limit, and using more than that can leave you with a lower limit.

Economic Uncertainty

When the economy is uncertain and most people face a financial crisis, many card issuers reduce the credit limits for their credit cardholders in order to minimize the risk. It is because there are high chances that cardholders will not be able to repay their dues on time in such situations. The Covid 19 pandemic can also be taken as an example as many cardholders faced a reduced credit limit during this time.

Inactive Card

If you use your credit card rarely or you don’t use it at all then your card issuer may decide to reduce your credit limit as they earn only when you use your credit card. If your card has been inactive for a long time, your credit card company will find it better to reduce your credit limit and increase the credit limit of an active cardholder so that they can earn profit.

Payment Behavior

If you spend a high amount of your credit limit and you are unable to repay it on time, you might seem to be a risky borrower and hence your card issuer can reduce your limit. Your payment behavior is one of the most significant factors that are taken into consideration when the credit limit is assigned to you. So, if you don’t want your credit limit to be reduced suddenly, try to pay your bills always on time.

Can Credit Card Companies Reduce Your Credit Limit Without Any Notice?

Yes, the card issuers have the sole right to increase or decrease any cardholder’s credit limit at any point when they feel to do so. It is not necessary for them to notify you before reducing your credit limit. However, many card issuers prefer to notify their customers through an email/SMS explaining the reason for the decrease in their credit limit. But, if the limit has been lowered suddenly and you spend beyond your limit, no over-limit fee will be charged within 45 days from the day when your credit limit was reduced.

What To Do When Your Credit Card Limit Is Reduced?

If your credit limit has been reduced without any prior notice, you must contact your credit card customer care and ask them the reason why they cut your credit limit. Let them explain and then you explain from your end. If you missed payments due to some genuine reason, explain it to them and ask them to reassign the previous limit to you. After contacting customer care, your credit limit may be re-instated or maybe not, but it can also be done afterward if you keep some important things in mind. The reduced card limit can lead to a high credit utilization ratio if you don’t minimize your spends. So, try not to spend more than 30% of your new limit in order to avoid a decrease in your credit score. Moreover, you must try to pay your full outstanding every month so that your card issuer can consider you a trustworthy customer whom they can provide with a higher credit limit.

Bottom Line

Credit cards are amazing financial tools that provide you with financial stability, provided that you use them responsibly. Even if your credit limit gets lowered without any warning, you can try to regain it by calling customer care or by not repeating the mistakes you made. So, just make sure that you are paying your bills on time, keep your credit utilization ratio low to avoid a credit limit cut.

Have you ever experienced a sudden decrease in credit limit? If yes, do share your experience in the comment section below.