You’ve just verified your credit card account and received bad news that the card issuer has lowered your credit limit.
It’s not common, but it’s a decision credit card companies often make in times of economic uncertainty. The COVID-19 pandemic certainly qualifies, and some credit card companies have reduced credit limits in recent months.
When a card’s credit limit is reduced, there are a few steps you need to take to minimize its impact on your credit score and your life.
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With luck, you can fix the problem in one step. Contact the card issuer. Your 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 is a secure chat or message option.
When connected to a representative, ask if your credit limit can be reset. Some consumers have reported success. While not guaranteed, it’s worth trying before you do anything else.
Check your credit score
The main problem after reducing your credit card limit is its impact on your credit score. Credit limits don’t directly affect your credit score, but they do determine your rate of credit usage, which has a big impact on your score.
Credit usage is a measure of your total credit card balances divided by the total credit limits on those cards. Low credit usage is good for your credit score – 20% or less usage is optimal – and high credit usage is bad for your credit. Obviously, if your balances stay the same and one of your credit limits goes down, it increases your credit usage.
You should look at your credit score to see if it has come down from your credit limit. Keep in mind that it can take up to a month before you see any changes. Credit card companies typically report cardholder balances and credit limits on a monthly basis.
Pay attention to your credit card balances
Depending on your reduction in your credit limit, you may need to adjust your spending habits. There are two things to watch out for:
- You could maximize the lower credit limit. If this happens, any transactions that would cause you to exceed your credit limit will be declined or you will be charged an overage fee if you have already agreed to this.
- Your regular spending will result in a higher use of credit than before, since your credit limit has gone down. It doesn’t matter if your credit usage drops from 5% to 8%. But if your credit limit has been significantly reduced and your usage drops from 20% to 50%, it will impact your credit score.
When using your credit cards, watch 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 is an easy way to get it.
Consider applying for a new credit card
Even if you can’t reset your old credit limit, you can apply for a new credit card instead. Another credit card can help if your current credit limits aren’t enough to comfortably cover your current expenses. It can also reduce your credit usage because its credit limit will be in addition to your existing credit limits. If you want to add as much credit as possible, high limit credit cards are a great choice.
Another option would be to request a credit limit increase on one of your current credit cards. Most card issuers allow you to do this online, but you can also call to request it.
Navigate to a lower credit limit
A reduction in your credit limit is embarrassing and potentially frustrating if it affects your credit score. However, there are many ways to fix it. You may be able to reset your credit limit on request. If that doesn’t work and the lower credit limit is a problem, take the opportunity to open a new card with the benefits you love.