Why did my credit card lower my spending limit?

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Q. I had a credit card with a $3,000 limit with a zero balance. I kept it like that for a year as I worked to pay off my other debts. After 12 months, the credit card company dropped the credit limit to $500. Why would they be so nervous about a zero balance?
— Borrower

A. You’re one of many who noticed during the COVID pandemic that credit card companies were lowering available balances to many customers, even those in good standing.

This was because the companies didn’t want to see people, as they entered financial hardship, charge up their cards, which they ultimately may not be able to pay.

It can be upsetting to see your credit limit drop for no apparent reason.

“Under the Fair Credit Reporting Act, credit card companies have the right to decrease the limit whenever they want to,” said Karra Kingston, a bankruptcy attorney in Union City. “Many times the lender will decrease the limit when the economy is bad or when a consumer has missed payments.”

It’s an attempt by the card company to lower its risk.

Fortunately, when a credit card company lowers a credit limit, it isn’t necessarily final, she said.

Credit card companies may lower limits when they feel the card isn’t being used enough, your credit score has decreased or they decided to change their credit lines, she said.

Simply ask your credit card company if it will increase your limit. You may find it is open to discussion — especially if you plan to use the card more often.

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This story was originally published on Jan. 24, 2023.

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