Credit Card Issuers Are Cutting Credit Limits: What You Need To Know

Credit Card Issuers Are Cutting Credit Limits | The Loaded Pig

The last words you want to hear…“your credit limit was lowered.” Credit card issuers are feeling the strain of the Coronavirus pandemic too – and that may have led to your credit card limit being lowered. This is not unprecedented, some credit card issuers also cut consumers’ credit limits during the 2008 financial crisis. This is done to minimize the risk that consumers will rack up credit card debt and then fail to pay the balance. You may be surprised to find out that credit card issuers can lower your credit limit. In fact, according to Forbes they only need to provide 45 days notice to cardholders.

Don’t panic though, there are a couple of things you can do to get your credit limit back to its original level.

Why Does Your Credit Limit Matter

The most obvious reason is because it limits your credit card spending. If you have been financially affected by the pandemic, you may be putting more expenses on your credit card and carrying a balance. Your credit limit may have been lowered because you have missed minimum payments, used too much of your credit or if you are not using the credit card at all.

Your credit limit also matters to your credit utilization ratio, which accounts for 30% of your FICO credit score. Your credit utilization is the amount of revolving credit that you are using divided by the amount of revolving credit you have available. Revolving credit does not include installment loans, like mortgage or auto loans. Rather it includes credit accounts that have a credit limit, like credit and retail cards. Lenders like to see a credit utilization ratio under 30%.

This means that if you combine the limits of all your credit and retail cards and it comes to $15,000, then the maximum credit you should use is $4,500 at a time. The lower the credit utilization ratio you have, the better your credit score will be. When your credit limit is lowered, your credit utilization will increase and consequently lower your credit score. So either you have to use less credit or raise your credit limit to keep your credit score the same.

The best thing to do in this situation is to try to get your credit limit raised. Thankfully, there are a couple of options to raise your credit limit if it was recently lowered.

Contact The Creditor

Credit Card Issuers Are Cutting Credit Limits | The Loaded Pig

First, you should call the credit card issuer that lowered your credit limit. Find out why your credit limit was reduced. If you haven’t missed any minimum payments recently or hit your credit limit, then you should be able to make a case for raising it.

Some issuers will require you to mail a form to them and others will allow you to complete a limit change request over the phone. The best way is to call the credit card issuer as soon as possible after you are notified that your credit limit was lowered. If they don’t budge or if you were to blame for the credit limit being lowered, then proceed to the next option.

Get A Credit Limit Increase On Another Card

If you have another credit card, then you may be in luck. Be sure to check this account to see that you have made all of the minimum payments on time recently and to make sure that you have not hit the credit limit within the past few months. This will help you gauge the likelihood that the credit card issuer will raise your credit limit. If all looks good, then give them a call.

Check Your Credit Reports

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If you’re unable to raise your credit limit, you should check your credit reports for any inaccurate information. Credit scams are on the rise right now, so be sure to review all activity. Report any inaccurate info to each credit bureau showing the discrepancy. If you did catch an error, then you can contact your credit card issuer after it is removed from your credit reports. If it was a discrepancy that decreased your creditworthiness, then you may be more likely to be approved for a credit limit increase after its resolved.

Check out this article for more info about how to check your credit reports for free. Note that usually you can only get your credit reports for free on an annual basis, but the 3 credit bureaus agreed to allow consumers to access their free online credit reports on a weekly basis through April 2021 because of the financial impact of Coronavirus.

Protect Your Credit

During these financially challenging times, you should make it a priority to protect your credit. One way to do this is to set up automatic payments for the minimum payment due each month for every credit account you have. Learn more actions you can take to safeguard your credit by reading, Stop Coronavirus From Impacting Your Credit Now.

Financial freedom begins with good habits.

Rebecca & Tiago,

Rebecca co-founded The Loaded Pig with the goal of helping people achieve their financial goals. Her passion for financial freedom has landed her on US News & World Report,, Cheapism, and many other sites. Rebecca earned her Master of Business Administration from the University of Florida and her Bachelor of Arts from the University of Miami. She is currently a professor in the business department at Broward College.