Why credit card companies are lowering limits and what you can do about it

CHARLOTTE, N.C. — During the first four months of 2021, nearly one in three credit card holders had their credit limit slashed or their account closed, according to a new report by LendingTree.

Matt Schulz works for LendingTree and he said it happened to him.

“I had my second oldest card closed,” he told Action 9′s Jason Stoogenke.

“[The credit card companies] were definitely concerned that people in the middle of a pandemic who just lost a job, who were very concerned about their finances, would start running up those credit card bills and maybe not be able to pay them back,” Schulz said.

It can also happen to people who are spending less.

The LendingTree survey showed that companies can target dormant or little-used credit cards for limit decreases or closure as well.

Not only can it come as a surprise, but it can hurt your credit score too. Your score depends on the percent of available credit you’re using, so even if you spend the same amount, if your credit limit goes down, you’re using a bigger chunk of it.

For example, if you spend $1,000 on your credit card and your credit limit is $10,000, you’re only using 10% of your available credit. But if the company cuts the limit to $2,000 and you still spend the same amount, now you’re using 50% of your available credit.

Schulz said there are ways to protect your card from being closed or limit reduced.

First, he recommends asking the credit card company to put your limit back to where it was. That’s what Schulz did when it happened to him, and he said it worked.

“If you don’t ask, you’re not going to get it. That’s for sure,” he said.

“It’s really important for folks to understand that they have more power over their credit card issuer than they think they do, especially in these really, really competitive times. But so few people actually wield it,” he said.

“A lot of times, all it takes is picking up the phone, calling your credit card issuer, and asking for that break, asking for that lower rate, asking for the higher credit limit, and your chances of success are way better than you think they are. You just need to pick up the phone,” he added.

If that doesn’t work, here are some other things you can do to protect your credit score:

Spread your spending across other credit cards so you’re not using more than 30% of any one card.

Make an extra payment in the middle of the payment cycle so your statement is lower.

Think about raising your limit on your other cards, but be careful. First, find out if they do a “hard credit check” because that could affect your credit. Ask for a “soft check.”

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