What to do if your credit card limit is suddenly cut

At a glance

• Credit card limits can be cut at any time, but if you’re not expecting it, it can come as a bit of a shock
• You may be able to appeal the decrease, but there’s no guarantee
• If you need a higher credit limit and can’t get it with your current provider, you may want to look at alternative borrowing options

All credit card lenders can cut customers’ credit card limits at any time. Yet even when we know this, having a credit card limit suddenly cut can cause stress and anxiety for borrowers, particularly if it’s unexpected.  Fortunately, there are some steps customers can take if their credit card limit has been reduced unexpectedly. We discuss them more below.

Can credit card companies lower your credit limit?

Yes, credit card companies’ terms will state that they can lower your credit limit at any time, and they may not even have to give any notice. In practice, most will let you know in advance if they’re planning a credit limit decrease, so make sure to be on the lookout for any communications from your provider.

Why did my credit card limit decrease?

There are a number of reasons why your provider may have cut your credit limit, including:

• You’ve missed payments (this can apply to other credit accounts, not just your credit card).
• You’ve gone over the credit limit.
• You only ever make low repayments (e.g. you make the minimum repayment each month but nothing more).
• You make multiple cash-like transactions.
• Your card is inactive.
• Your credit utilisation is low.
• You apply for several new types of credit in a short space of time (this can indicate that you’re struggling financially).
• You’ve been made bankrupt or have a history of County Court Judgements (CCJs).
• The provider wants to reduce their overall risk by limiting the amount of borrowing that customers can have.

What to do if your credit limit is cut

You’ve heard from your credit card provider that your credit card limit is set to be cut. So what can you do? First thing’s first – don’t panic! It can be stressful to be told you’re getting a credit limit decrease, particularly if you use credit to help manage your cash flow or are planning a large purchase in the near future, but there are steps you can take.

Find out why

You’ll want to contact your provider in the first instance to find out more information, specifically, why they’ve decided to reduce your limit. The provider may be able to tell you why they made their decision, and let you know if there’s anything you can do about it.

Appeal the cut

In some cases, you may be able to appeal the cut. This is more likely in situations where you have valid reasons to appeal and proof to back up your claim – for example, if the credit card company cut the limit due to concerns about a reduction in your monthly income, but if you can provide payslips proving that your income has remained the same or increased, you may be able to keep the original limit. There’s no guarantee though, and some providers won’t let you appeal at all, so be aware that things may not change.

Consider the reason for the decrease

If the provider gave valid reasons for reducing your card limit, it’s worth addressing the underlying issue. For example, if the provider was concerned that you only ever made the minimum repayments, start trying to pay more than the minimum across your credit accounts to see if you can boost your standing.

Stick with the lower limit

If you haven’t been able to appeal and understand your provider’s reasoning, it may be time to reluctantly accept the cut. You can stick with the card and the lower limit for now, and could always ask to increase it at a later date if and when your financial situation improves.

Apply for a new card with a higher limit

Alternatively, you may be able to get the credit limit you’re looking for with a new card instead. However, you’ll first want to check your credit score, which can be done online for free here, to see the likelihood of being accepted for a new credit card and the potential limit you could get (normally, the higher the credit score, the more willing a credit card provider will be to offer a higher limit; if yours could be better, read our guide on improving your credit score first). Just make sure to bear in mind the risks when applying, namely that applying for several new lines of credit in a short space of time could indicate that you’re struggling, and any application will result in a temporary dip to your credit score.

Alternative credit options after a limit cut

• 0% balance transfer card. Got a good credit score with an outstanding balance on your existing credit card? You may want to consider applying for a 0% balance transfer card. This card will allow you to transfer your existing balance to the new card and you’ll have an interest-free period in which to repay it.
• 0% purchase card. Got some upcoming purchases in mind? You may want to consider a 0% purchase credit card. These cards offer a period in which customers can make purchases and not pay any interest, though make sure to repay the balance before the interest-free period ends to avoid having interest added to it.
• Personal loan. A personal loan may be a better option if you’re looking to borrow a larger amount, for example £5,000 to £10,000, to pay for a specific purchase such as a holiday or a new bathroom.
• Secured loan. Alternatively, if you’re looking to borrow a larger amount, for example £20,000 or more, a secured loan could be an option. These loans allow you to borrow large amounts as they require you to put an asset against the loan, normally your home. Just keep in mind that failing to keep up with repayments could result in you losing your home.

Borrowing options if you have a poor credit score

If you’ve got a poor credit score you’ll normally be offered a lower credit limit than those with a good score, in which case it may be better sticking with the current credit card despite the limit being cut. Alternatively, there are credit repair cards available that are aimed specifically at those with poor credit scores, though bear in mind that these cards usually charge a much higher interest rate than standard credit cards, so only borrow what you can afford to repay each month to avoid falling further into debt.

Does a credit limit decrease affect your credit score?

Yes, though indirectly. A credit limit decrease brings down your credit utilisation ratio, which is the amount of credit you have available versus the amount you’re actually using. So if you had, say, a £2,000 credit limit with a balance of £500, your credit utilisation would be 25%. However, if your card provider reduced your limit to £1,000, your credit utilisation would now be 50% – and this can have a negative effect on your credit score.

It’s generally advisable to keep your credit utilisation below 30%, and so a higher percentage could be an issue, potentially signalling to providers that you’re over-reliant on credit and could be a borrowing risk. This is regardless of the fact that the higher ratio was as a result of the limit being cut.

Tips to avoid a credit limit cut

While there’s never any guarantee that you can avoid a cut to your credit limit, there are a few things you can do to try to reduce the chances:

• Make all debt payments on time
• Try to pay more than the minimum amount
• Avoid racking up too much debt
• Never exceed the credit limit
• Don’t take on more credit than you can afford
• Keep an eye on your credit utilisation ratio
• Check your credit score regularly

Can I lower my own credit limit?

Technically yes, and in fact it’ll be easier to request a credit limit cut than to ask for an increase at a later date. You may want to ask for a lower limit if you’re worried that having too much available credit could be too tempting, and you want to make sure you don’t get into problem debt. However, make sure that lowering your limit won’t negatively impact your credit utilisation score, and be mindful of the fact that it can be difficult to reverse your decision if you later change your mind, so make sure that this is definitely the right course of action.