What to Do When Credit Limit On Your Credit Card Gets Reduced

How to Respond to a Credit Limit Cut

having your credit limit slashed can be an inconvenience. It can put you in an uncomfortable situation when you need to use your credit card but cannot because you have already approached your credit limit without you being aware of it. This can happen when your credit limit has been used by the creditor and you are not aware of it. Reduction in the credit limit can also mess around with your credit utilisation which is an important factor used during the credit score calculation. Getting the credit limit cut on a credit card may result in you maxing out your credit card or even going over the limit which would further incur heavy monthly charges as high up to $40.

What to do when the credit limit on your credit card is slashed

You can do a few simple things in order to counter the negative effect of the reduction in the credit limit of your credit card.

 Pay down the Balance on Your Credit Card

You can pay the balance down so that your credit limit once again becomes available to you. It will also decrease the credit utilisation on the credit card which should ideally be around 30% of the total credit limit. This will not only help with the credit score but also safeguard your guests going over the limit and incurring extra over the limit credit card fees.

You can also transfer the balance to another credit card.

Ideally the new credit card should have a higher credit limit than your credit card because transferring additional balance on to it might take you very close to the credit limit of that credit card and once again have a negative impact on your credit utilisation ratio which would then go on to affect your credit score negatively. You should remember how however that transferring a balance to another card usually has a fee associated with it. It could be one to 3% of the balance being transferred along with other processing fee. This could make the balance transfer an expensive proposition and cost you more than you’re willing to spend.

Negotiate with your creditor.

You can speak to your creditor about bringing your higher credit limit back. You may or may not be aware of the reasons that your credit limit was cut and talking to your creditor may help you deal with the issue. However this is an unlikely situation as it is difficult to get your credit card limit up immediately once it has been slashed on. Creditors usually have reason why they would want to cut down on a credit limit of a particular consumer.

If the card in the credit limit is not affect you too much then you may continue to use the card as you have used before. Just make sure that the balance on your credit card stays around 30% of the credit limit available and repaid the balance at the end of every month so that you can enjoy the benefit of the credit card as will as a positive effect on your credit score.

You should not be too hasty in closing down a credit card as a way of getting back taking revenge on the creditor specially if the credit card still holds a balance. Whenever a credit card with a balance is close the credit limit on a credit card is brought down to 0. On the credit report it looks like you have maxed out your credit card because even though it is closed and has a credit limit of zero you still have a balance on it. This is not very good for the credit score. You should not close a card until you’ve completely paid it.