Fight back against card limit cuts

Posted in 'Personal Finance' by Barry Stamp

12 March 2009

We’re still receiving regular reports of lenders suddenly cutting the credit limits on credit cards that have been issued for many years without any problem. Whatever you do, don’t just lie back and take it without challenge.

Remember, the difference between your credit limits and your balances – called ‘headroom’ – can be a component of some credit scorecards. A sudden reduction in your credit limit on one card can impact your ability to get credit with another company.

So if this happens to you, apply immediately for another card to restore your spending power, and while your old limit continues to be reported to the agencies – this is usually for a period of up to one month. Use our free credit finding service to find lenders most likely to say ‘yes’ to your application, and also to find the cheapest card available to you.

Then think about asking the card company to reconsider their decision. This is best done by phoning the card company customer service number. Even if you haven’t used that particular credit card for some time, you should point out that you have the card for emergency use and the card was marketed to you on the basis that it gave you spending power in reserve. Also use the opportunity to update your financial situation, as it’s likely that your salary is now higher than it was when you originally applied for the card. The credit card company may not agree to restore your original limit, but you may be able to negotiate a compromise position.

Even if the card company reduces your limit to a nominal sum of £250 or so, don’t close the account. Instead, keep it open so that your credit history is preserved for as along as possible and use the card occasionally for small purchases. An active card with a perfect repayment record is an invaluable addition to your credit report, no matter how small the limit is.

Also think about monitoring your credit report to find out how you stand and how things change as lenders vary credit limits. You can obtain unlimited access to credit reports based on Callcredit data from as little as £4.85 per month.

For anyone affected, it’s time to change to a new supplier. Use our free Find a Lender service to find an even better replacement credit card.