Can My Credit Card Company Cut My Credit Limit Without Notice?

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I just learned my credit card limit was slashed by $5,000 – and I wasn’t told why. I could understand it if I lost my job during this pandemic, but I’m a nurse! I’m busier than ever, even earning overtime.

My boyfriend got laid off, so I’ve been putting more charges on my credit card to help him out, but I make regular payments. My balances have creeped up, but I’m never late. I could really use that extra limit. What happened and is there anything I can do about it?

– Jane in Tennessee

Howard Dvorkin, CPA, and Debt.com chairman responds…

Credit limits are like the weather. They can change at any time, and without warning.

With the pandemic dragging on, storm clouds are forming in the credit card industry. Experts who monitor these things report that “demand for new credit cards has plunged” while a “spike in disputed payments is causing headaches for the card industry.”

What’s that mean for you? Well, credit card companies are just as worried about their bottom lines as you are. So, they’re changing their rules on the fly to protect themselves.

Credit limits aren’t legislated, so your card issuer can change yours whenever it feels like it. This happened even before the pandemic. Most people just didn’t have any reason to notice it.

How credit limits are determined

Before we discuss why your credit limit dipped, let’s quickly review how they’re set in the first place. Your issuer looks at several factors, although they’re tight-lipped about how they actually decide:

• your credit score
• your income
• how much credit you already have
• how much of that credit you’re already using

So, if your credit score drops and your income takes a hit, your card issuers might get nervous and lower your credit limits. Why? Because you might run up your cards right till the limit, then not have enough to ever pay them back.

Conversely, I hear from many people who get notices that their credit limit has been raised. In those cases, your card issuers figure you can handle more charges – and they can make more money off the steep interest rates they charge.

How the pandemic affects your credit limits

The economic upheaval caused by the pandemic has credit card issuers behaving just like they did during the Great Recession.

During a recession, people borrow more money to pay their bills – because they don’t have any other way to get the cash they need. That almost always means more delinquencies, which cost the issuers more money. So, they lower your limits, which lower their risk.

What you can do about it

The first remedy sounds too basic to work: Call your credit card issuer and ask for your limit to be restored.

This is more likely to work if you’ve had your card for a long time and have a good payment history. Like any other business, you’d be considered a good customer – and businesses don’t want to lose good customers.

You might not get your limit all the way back to what it was, but you might get halfway there. That’s still pretty good for one phone call.

Other than that, you can try opening another card. Credit limits vary by issuer, so while Chase has been known to slash credit limits recently, others might be more patient.

Really, though, the problem isn’t your credit limit. If you need that limit to make ends meet, then you need to get professional help now.

You’ll bump up against that limit very soon if you’re using credit cards to simply make ends meet. Instead, call Debt.com and speak with a credit counselor who can help you actually cut your monthly payments.