What To Do If Your Credit Card Issuer Lowered Your Limit | Bankrate (2024)

A credit limit decrease can be an unwelcome event, but they’re fairly common and not final.

Card issuers frequently change credit lines for a variety of reasons, which may or may not have anything to do with the way you handled the account. Lowering credit lines is simply a strategy to mitigate risk, and an issuer may take that action when necessary.

That doesn’t mean you are powerless against the decrease. If you’re not satisfied with the new limit, you may be able to persuade the issuer to hike it back up again. And if that doesn’t work, there are other options to make your desired transactions.

Why credit card issuers lower limits

As outlined in the Fair Credit Reporting Act, credit card issuers have the right to lower credit limits at will and may do so when a cardholder appears to be in financial trouble. If you missed due dates or carry high debt and only send the minimum payments, the issuer may shorten the limit. Or, if you haven’t paid with the card in a long time, the issuer may decide to reduce the line or even close the account.

Another consideration is the economy. Issuers tend to extend larger lines when conditions are favorable and shorter ones when they’re not. Therefore, if the economy was in a robust position when you applied for the card, it may adjust the line downward when it’s not. Such was the case in 2020.

When the COVID-19 pandemic hit the U.S. in March 2020, card issuers began to reevaluate credit lines. In fact, a July 2020 LendingTree survey found that 34 percent of cardholders had at least one of their credit cards’ limits reduced that summer.

“By that point, many in the U.S. had lost their jobs,” says Matthew Goldman, CEO of Vertical Finance, a credit card loyalty program company. “However, when people applied for the cards, part of the qualification and limit-setting process was dependent on the applicants’ household income. It showed the creditor that the person could afford the debt associated with the credit line. If the person’s income was lost or went down, that would expose the creditor to heightened risk, so they took preemptive action.”

Among those who felt the credit line squeeze was John Egan, a financial writer from Austin, Texas. Though he always maintained a healthy credit history, the lines on three of his four cards were cut back in 2020. “It all basically happened at once,” says Egan. “One card’s limit went down by about 65 percent, and that was a business card. But all were cut by at least a thousand dollars.”

Outside of problematic credit card activity and economic volatility, issuers may also adjust credit limits based on their own internal financial circ*mstances and capital reserves.

What lower limits mean for your credit scores

In the event that you carry a balance, a credit card limit decreasecan result in a drop in your credit scores, even if you’ve been managing your cards responsibly.

The most commonly used consumer credit scores are produced by FICO and VantageScore, and each rank revolving debt as an important factor. The amount of the credit line you’ve already used up, both per credit card and on all of your cards, is calculated into your scores.

In general, a revolving balance below 30 percent of the limit is ideal. When a credit card issuer lowers the limit on a card that has a balance, though, the debt-to-credit limit ratio will be inflated and can have a serious negative effect on your credit scores.

For example, if your credit card has a $1,000 limit and you currently owe $250, your credit utilization ratio would be at a safe 25 percent. But if the issuer halves your limit, that same debt would comprise 50 percent of the credit line, potentially causing your scores to decline.

Contact your credit card issuer

If you believe you can afford a larger credit line, contact the credit card issuer and ask to speak to a representative who has the authority to make changes to your account.

“People have a perception that banks know more about them than they really do,” says Goldman. “Communicate to them what your income is. What you’re making is an important part of their calculation. They only get that information when you first applied for the account. Maybe you’re making more, or your occupation is stable and it’s unlikely you’ll be laid off.”

Just be honest, since the issuer may request documentation. If you’ve been a responsible and active cardholder, the issuer may increase the limit.

Still, success isn’t guaranteed. When Egan called one of his card issuers, the representative informed him that they were trying to find ways to reduce risk, thus sticking with the adjustment. “I was disappointed,” says Egan. “I’ve been very diligent about making my payments on time and having a low credit utilization ratio, all the things you’re supposed to do to keep your credit strong.”

In such a case, you may want to wait the decision out. “Don’t stop trying,” says Goldman. “Pay any debt down and never miss a payment. Then call and ask again.”

If your card’s limit was reduced due to account dormancy, pick it up and start using it, says Howard Dvorkin, a New Jersey-based CPA and chairman of Debt.com. “After you make a few charges, they may change their mind.”

To further inspire credit card issuers to up your limits, make sure your credit reports are clean of errors or fraud. Before asking for a credit limit raise, review your three consumer credit reports from AnnualCreditReport.com. If you see any inaccuracies that are bringing your scores down, dispute them.

You will also want your reports to list plenty of attractive and accurate data. “It’s possible that the issuer lowered your limit because you did make some mistakes,” says Dvorkin. In that case, get back on track. Use your cards monthly, pay on time and delete revolving debt. After at least six months, contact the issuer again. With that evidence on your reports, you may be eligible for a higher line.

How to make large transactions with a smaller credit line

In the event that your current credit issuers refuse to budge on the limit, and you want or need to make some substantial transactions but don’t have the cash available, consider your options:

  • Open a new credit card. There are plenty of great credit cards on the market, so apply for a new account. If you want to make large purchases, the right card will be essential, so choose carefully.
  • Take out a loan. If you want to buy something and then pay it off in monthly installments, a loan may be the right choice. It may help your credit scores rise, too. It can add to the variety of credit products in use without impairing your debt-to-credit ratio since installment loans aren’t revolving credit products.
  • Use layaway. Such major retailers as Burlington, Walmart and Sears offer layaway programs where you can reserve an item with a cash deposit and then pay the remaining balance off over time. When you’re all paid up, the item is yours. No credit check is required because it’s not a credit product, though small fees may apply.
  • Pay incrementally. Shopping channels such as QVC and HSN and some major retailers like Macy’soffer payment arrangements (through services like Klarna)where the price is divided into a few equal payments. For example, if you would like to buy a $200 piece of jewelry, the company might break it up into four payments of $50. That might be well under your (newly lowered) credit line, so it won’t put your credit scores at risk.
  • Consider alternative financing. With companies like CareCredit, you can cover out-of-pocket health expenses (for you and your pet) interest-free with short-term financing plans.

How to avoid a credit limit decrease

Although you have no control over an economic downturn or a credit issuer’s internal business decisions, you can take steps to offset the possibility of a credit issuer lowering your credit line for other reasons in the future.

First, become an active credit customer. “Regularly use the cards you have, even if it’s just a small purchase, so it’s not dormant,” says Egan. It will indicate to the issuer that you do need the credit line and that it shouldn’t go to somebody else.

Then, treat all credit accounts responsibly. If you have a tendency to pay late, enroll in automatic bill pay to ensure timely payments. For credit cards, send the entire amount due whenever possible. If your balance does creep up, suspend charging and aggressively pay the debt down.

Making more money now than you used to? Get on the phone and notify the credit card issuer to have that information updated.

At least annually, assess the active credit cards you have and use. Each account should have a credit limit that commiserates with your spending needs. Add more cards to your portfolio if you need more charging ability. This way, you’re less likely to come up short in the event of a credit line adjustment. And if a credit card issuer does lower your line, you’ll know what to do.

“Remember, it’s not a personal insult,” says Dvorkin. “It’s a business decision.” Convince them that you are a good credit risk, after all.

What To Do If Your Credit Card Issuer Lowered Your Limit | Bankrate (2024)


What do I do if my credit limit is lowered? ›

Reach out to your lender or creditor and ask them to reinstate your credit limit. Many borrowers are calling their lenders to request delayed or reduced payments.

Why is my credit card giving me a low limit? ›

If you're issued a credit card with a low credit limit, it could be for a number of reasons, including: Poor credit history. High balances with other credit cards. Low income.

What happens if my credit limit increase is declined? ›

Getting declined for a credit limit increase might impact your credit scores. Whether it does depends on if the card issuer reviews your credit report with a hard or soft inquiry before making their decision. If it's a soft inquiry, your credit scores won't be affected at all.

Can credit card companies increase your limit without your permission? ›

The second way you may get a credit limit increase is if a credit card company increases your limit without a request from you. This typically occurs after you've demonstrated responsible credit habits such as making on-time payments and paying more than the minimum payment required.

How do I get my credit limit back up? ›

You might be able to get a credit limit increase by asking for one, or your lender could offer one. Keeping your financial information up to date, making on-time payments and monitoring your credit reports can help if you're looking to get a credit line increase.

Is a $12,000 credit limit good? ›

Yes, $12,000 is a high credit card limit. Generally, a high credit card limit is considered to be $5,000 or more, and you will likely need good or excellent credit, along with a solid income, to get a limit of $12,000 or higher.

Can a credit card company lower your limit without warning? ›

In most cases, a credit card issuer must provide an adverse action notice when your credit limit is reduced. However, they are not required to give you any notice before doing so.

Is a $500 credit limit good? ›

A $500 credit limit is good if you have fair, limited or bad credit, as cards in those categories have low minimum limits. The average credit card limit overall is around $13,000, but you typically need above-average credit, a high income and little to no existing debt to get a limit that high.

What is the average credit card limit? ›

When averaging credit limit data across generations from Experian®, the average credit limit in America is $28,929.80. Your credit card limit depends on your credit score, age, income, and other factors. Credit card limits can range anywhere from $300 to more than $100,000.

Does being denied a credit limit increase hurt your credit score? ›

Does Asking for a Credit Limit Increase Affect Your Credit Score? That can depend on your credit card issuer. If it does what's known as a soft credit check, it will not affect your credit score in any way. If the company makes a hard credit check, that may lower your score a bit, but usually only temporarily.

How long should you wait to request a credit limit increase? ›

Consider paying off debt first. When you just opened the card or requested a credit limit increase: Many card issuers require you to wait at least three months after account opening before requesting a credit limit increase.

How long does it take to increase a credit limit? ›

Be prepared to explain why you're asking for more credit, and to provide information on your income and housing expenses (rent or mortgage). Your request may be approved on the spot, though some requests take up to 30 days to be approved or processed.

Can you dispute a credit limit decrease? ›

A lower credit limit could be bad, depending on how much other credit you have available. But you have a few options. The main one is to call the number on the back of the card and ask the issuer to restore your previous credit limit.

How to convince credit card company to increase credit limit? ›

You can increase the odds of a credit increase request being approved by taking a few proactive actions in advance to improve your credit score and profile. Reviewing your income and aligning your request with any income increases can also be a helpful approach.

Is it better to get a new credit card or increase the limit? ›

If you like your current card, asking for an increase could be the right move. But if you're looking for additional rewards or a better rate, opening a new line of credit may be the right option. No matter what you choose, always remember to use credit responsibly and spend within your means.

Does credit limit decrease affect credit score? ›

A lower credit limit could potentially affect your credit score, even if you pay on time, every time. That's because your credit utilization rate, the percentage of your available credit that is in use, has a significant impact on your credit scores.

Does credit limit reset after minimum payment? ›

The credit limit is the total amount of credit available to you on the card, and it will only reset if you pay off the entire balance or if your credit card issuer increases your credit limit. Making a minimum payment on your credit card balance will only satisfy the minimum payment requirement for that billing cycle.

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