Credit Card Limit Lowered? Here's What To Do
If we get a message from our credit card issuer "Dear customer, effective April 30, 2014, the credit limit on your card number XXXX has been reduced to Rs 20,000." What would you do if you receive such a text message from your card issuer? You would probably think it is a mistake, but unfortunately it may not be so.
Post the recession that gripped the world five years ago, credit card issuers judge the 'creditworthiness' of their customers and reduce credit limits of their customers from time to time in order to be cautious of their own risk profile. If your credit limit is lowered it will impact your debt to credit ratio and thus be a statement on your credit utilisation. A high credit utilisation will impact your Cibil score negatively and reduce your chances of getting loans in the future.
So, if your credit limit is slashed here are five things you may do:
Call your card issuer
Try and call your card issuer to reason with them. If you have things like an impending pay hike or substantial savings that you can use to pay off your debts, tell them that. There are chances that they will be willing to restore your credit limit.
Don't be rash in closing your account
If making telephone calls do not help, don't make the mistake of closing your account in a huff. A sudden closure of an account that is long standing too has a negative impact on your Cibil score.
Look around for a better opportunity
A lowered credit limit may turn out to be a great opportunity. However, don't jump for the first offer you get. Instead, do your research well. With so many issuers around, it may not be difficult to get a card issuer who offers you better rates of interest and also does the balance transfer from your previous account for free. This may be an ideal switch for you. Â
Take out the automatic payments
If you cannot switch accounts, and need to stick with your current card issuers, there are other things you can do. For instance, are there regular ECS (electronic clearance system) payments of bills that happen from your credit card? If yes, try transferring them to your savings account instead. This way you could reduce you minimum due balance each month.
Pay it off
This may sound difficult, but there is a lot of merit in paying off the dues against your card with some of your savings. As long as you don't make a huge dent in your savings, doing this will help you improve the debt to credit ratio and therefore your credit score.
This may all sound scary and confusing because you never thought you would be faced with such a situation. However using this information prudently, may be able to save the day for you and keep your Cibil credit score intact.Â
Disclaimer: All information in this article has been provided by Creditvidya.com and NDTV Profit is not responsible for the accuracy and completeness of the same.
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