Getting your credit limit cut is not convenient, but learn what you can consider doing
The effects of the coronavirus pandemic are real, and credit card issuers have felt them. According to a survey by CompareCards, about 70 million people, more than one-third of credit cardholders, said they involuntarily had a credit limit reduced or a credit account closed in a 60-day window stretching from mid-May to mid-July. This number will likely increase before the end of this year due to credit card issuers wanting to reduce their risk of having too many unpaid balances.
Getting your credit limit cut will likely lead to an increase in your overall credit utilization, which has a high impact on your FICO Score and VantageScore. Your overall credit utilization should be 30% or less of your overall credit limit. The lower your credit utilization, the better.
With so many people getting their credit limits cut, or worse, their accounts closed, it is important to be aware of what you should consider doing if your credit limit is cut. The following are 3 things you should consider doing: call the customer service number on the back of your credit card, open a new credit card, and do not close your old credit card.
1. Call the Customer Service Number on the Back of Your Credit Card
It can be extremely frustrating to see that your credit limit has been cut. The first step you can take in getting your credit limit restored is calling the customer service number on the back of your credit card. Being able to talk to a customer service representative will give you the chance to explain your situation and why you are not deserving of a credit limit decrease.
When you are speaking to a customer service representative, remember to be polite when you are explaining your situation. They will likely not have the ultimate power to restore your credit limit. Still, you should be able to eventually get connected to a manager, depending on how you explain your situation. Remember to mention things such as how long you have been a loyal customer and how you have never missed a payment. There is no guarantee, but you miss 100% of the shots you do not take.
2. Open a New Credit Card
If you were not able to get your credit limit restored on that card that had its credit limit cut, it might be time for you to consider opening a new credit card so that your overall credit utilization does not increase. In opening a new credit card, you must conduct the appropriate research so that you are getting a credit card that will benefit you.
You must be understanding of your spending habits, the kind of rewards that you want, the benefit that you want, and if you are willing to pay an annual fee. Once you can respond to those points, you can go ahead and apply for a new credit card. It is important to remember to continue to be a responsible user of credit with your new credit card so that you can continue to witness increases in both your FICO Score and VantageScore.
3. Do Not Close Your Old Credit Card
If you decided to or not to open a new credit card, you should not close your old credit card. If you do close it, you will likely experience an increase in your credit utilization and a decrease in your credit history. Building credit is a long-term game, so you should plan on keeping old credit cards open unless it is completely necessary to close them.
The primary reasons to close an old credit card would be it being a secured credit card that you cannot change into an unsecured credit card, or it having an annual fee and you cannot downgrade it to a no-annual-fee version.
Credit card issuers have the power to reduce credit card limits or close credit cards whenever they would like to. Economic uncertainty due to the coronavirus pandemic is the reason why many credit card issuers are doing that. Somethings will never be in our complete control, but becoming understanding of the things that you can do will be vital to you on your path to long-term financial success.
3 Things to Consider Doing If Your Credit Limit Is Cut was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.
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