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Credit Card Limit Reduced Without Warning? Find Out Why

By Finserv MARKETS - Aug 12,2019
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Credit card limit getting reduced without warning

A credit card offers the facility of ‘buy now, pay later’ and many people today use credit card to purchase goods and services. Most banks or non-banking financial companies (NBFCs) set a pre-decided limit on their credit cards, called the credit card limit. This credit limit is the maximum amount that the bank or NBFCs can extend to the credit-cardholder for the line of credit. A cardholder is made aware of the credit limit at the time of sanctioning the credit card. This knowledge helps in estimating how much debt he/she can take on the credit card. However, a common question asked is can credit card companies reduce credit card limit? Read on further to know –

In ideal cases, credit card companies refrain from slashing the credit card limit without first intimating the cardholder. However, they might alter the limit without a warning especially because of the following reasons-

  • When the credit card holder is consistently missing on his/her payments.
  • When the debt-to-income ratio of the cardholder has increased marginally to a point where the credit card companies deem it risky. Your debt-to-income ratio is the ratio of all your monthly debt payments divided by your total monthly income and is the first thing debt providers check to approve your credit card application.
  • When the credit card holder’s financial history gives the impression that he/she would not be able to pay back the borrowed credit
  • In certain cases, the credit card companies may also reduce the limit when the cardholder is not using a major portion of the credited limit.

Measures to Take When Your Credit Card Limit Is Lowered without a Warning

  1. Immediately contact your credit card company for explanation:

In case your credit card company reduces your credit-card limit without giving you any heads-up, you must immediately contact their representative and politely ask for a reason why they have done so. You can also request and try to convince them to reinstate the previous limit by providing some reassuring them about your strong financial history

  1. Review your credit report

In case the reason for slashing your credit limit is your low credit score, make sure you check your credit report to see whether there has been any error resulting in a drop in your credit score. Normally, a good credit score is 700 and above. If your credit score has gone way down from this number, credit card companies might deem you incompetent to repay the dues and slash your limit. If this has been the case, make sure you carefully go through your credit report and examine where you have gone wrong.

Check CIBIL Score

  1. Cut back on your expenses

Try to put a lid on your purchases until your credit-to income ratio improves considerably. Ideally, a 30% credit utilization ratio is considered standard for improving your credit score. Also, with an effort to reverse your credit limit to a higher side, make sure you clear all your existing credit card bills or EMI dues on any personal loan on time.

The bottom-line

Credit card companies generally have a very solid reason to reduce your credit card limit. In addition, when there is a related clause in the credit card agreement, the credit card companies can slash or increase the credit limit at any time, without warning. Try to be vigilant in your credit card use and not give them any such reasons to cut back on your credit limit. In case your credit score has suffered a setback, work on improving it. One of the key factors that can help boost your credit score is by taking out a personal loan. The EMIs on your personal loan can reflect positively on your credit report. However, before taking such measure, make sure that you would be able to repay the loan on time; as otherwise, it would defeat the entire purpose. For affordable personal loans, explore your options at Finserv MARKETS. The Bajaj Finserv Personal Loan comes with nominal interest rates and guarantees complete transparency in all your transactions. Availing a personal loan at Finserv MARKETS can definitely help in building a good credit limit, which in turn, would considerably reduce the chances of your credit-card limit getting reduced.

You can also read about how a personal loan can increase your credit score. Also get a more information on lesser known reasons that hurt credit score.

Finserv MARKETS, from the house of Bajaj Finserv is an exclusive online supermarket for all your personal and financial needs. Loans, Insurance, Investment and exclusive EMI store, all under one roof- anytime, anywhere!

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522