What Should I do if my Available Credit gets Lowered?

Lately, I have come across countless stories of credit card customers who are getting their credit limits dropped, for no apparent reason. Sometimes these drops are small and insignificant to the cardholder. Other times, these stories are devastating. What should you do if this happens to you?

Get on the Phone.

Call your card issuer as soon as you find out about the credit limit change. Ask them to re-evaluate your account and reconsider the change. Most of the time, with limit decreases, the card company will be unwilling to budge. Even if this is the case, it never hurts to ask. Plead your case and let them know that you are not a fool. During the conversation, bring up your status as a customer and ask for other card perks. A lower interest rate, rewards upgrades or a waive of the annual fee (if applicable) are all reasonable requests by the customer. You have a better than 50/50 chance of getting a better deal if you just ask.

Pay Down as Much as Possible.

I realize that this is easier said than done, but a sudden decrease in your available credit most likely means a change in your debt/credit ratio. This means a change in your credit score. If you were using up 25% of your available credit and your limit gets sliced in half, you are suddenly using 50% of your available credit. This would mean a HUGE hit to your score. Paying off a large chunk of the balance may avoid such a dangerous situation. Usually the change is not this drastic, but this scenario can still affect your credit a great deal.

Do Not Apply for More Credit.

This piece of advice comes with an “unless” clause. I personally do not recommend applying for new credit if your limit has been lowered. If you are well aware of your credit score and know without question that another creditor will grant you credit, get a new card and transfer the balance. If you are not aware of your credit score, or are not sure whether you are creditworthy, do not take the risk. More inquiries can lower your score, and this is not the time to take the chance of lowering it.

If Your Limit was Lowered to Below the Balance.

Many companies as of late have been lowering available credit in order to reduce the liabilities they may face with a declining economic situation. Some are dropping credit limits below the balances. What do do?

Fight, fight, fight! If your card issuer is trying to squeeze you by lowering your limit to below the balance, when you make the call, fight to no end. Especially if they are charging over-limit fees on top of this. It is just unethical. If they do not comply with your requests, play hard ball with them. Use media outlets or consumer advocate groups to get what you want. The Consumerist (owned by consumer reports) would be a pretty good place to start, and they have an amazing track record of getting businesses to play fair. Just because you are the “little guy” doesn’t mean you do not have a voice.

Unfortunately, you can not stop your card issuer from sweeping the rug out from under you and dropping your limit. Be proactive and prepare yourself for the worst case scenario. Do not use your credit card as an emergency fund. You never know if those funds will actually be available to you in case an emergency does arise.

Watch Out for Terms & Conditions Changes.

When the limit changes come around, they often come with changes in your card agreement. I know that the language in these pamphlets is nearly unreadable, but this is all information that you need to know and understand. If you can not decipher this language yourself, get someone who can. These few pages are the best way to find out if this card is worth hanging on to.

Even if you feel wronged, legally speaking, there is nothing you can do to change how these companies handle your account. Being proactive and prepared are the best ways to handle these changes. Now go make a payment on your card and read some disclaimers!