Most of us rely on our credit cards. Some use them for every purchase they make in order to rack up those reward points, while others tend to take it easy with the spending in order to not get in over their head. Regardless, there may be a time when you go to use your card and suddenly it is declined. You make a quick call and find out that the company has cut your credit limit (sometimes by as much as 80% or more). What do you do when this happens?
What to do When Your Limit is Cut
The first thing you should do, while you still have the credit card company on the phone, is find out why your limit is cut. Most likely there is no reasonable explanation. The credit card company is trying to reduce their risk, and so they went through and made sweeping cuts to everyone’s limit. Unfortunately, it is perfectly legal to do so without giving you a warning. When the representative can’t give you a decent explanation (and they won’t be able to because they don’t have one) ask to speak with a supervisor.
When you have the supervisor on the phone, ask politely to have your limit raised back to its previous level. Explain that you have made consistent on-time payments, you have never been late (if this is true), and you have been a great customer for a number of years. If they give you some pushback, then ask to speak with someone that can raise your rate back up. If they still push back, then kindly explain you will be forced to close your card with them and open a new card with a different company that will give you the rate you want.
Now is where it gets tricky. You need to be willing to follow through on your threats. But there are things to keep in mind before you do.
If your oldest credit card is the one that has cut your rate, don’t close the account. If you do, you will damage your credit score by closing an account that has a lot of history to it. Instead, simply stop using the card.
Opening a new card may actually benefit you. It can take some work to get all of your automatic payments transferred over, but there are a lot of cards out there that will give you significant rewards. Some airline cards will give you up to 60,000 bonus miles for opening a card; other cards like the Barclaycard Arrival Plus will give you 40,000 miles for signing up (assuming you meet the spending requirements), double miles on all purchases, and more.
When Your Limit is Cut
You don’t want to keep your credit limit low. It doesn’t need to be outrageously high, but you want to make sure that you aren’t going over about 50% of your limit each month; otherwise you may see a decline in your credit score.
If you get your credit limit cut, there is little that you can do. But you can take the opportunity to find a card that gives you significantly better rewards.
*Editorial Note: Any opinions, analysis, reviews, or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.