How Can A Credit Card Company Lower My Limit if I’m Paying on Time?

Q. Can a credit card issuer reduce your credit limit or available credit that you can borrow? I have a Synchrony Card, and I have used their 12-month, interest-free promotion for three years. Suddenly, my available credit was reduced by 50%. Is that possible? I make my payments on time and paid the balance before the promo ended. — Nestor

A. Let’s start by addressing this question broadly: While the CARD Act prohibits issuers from changing certain credit card terms, like your annual percentage rates, without at least 45 days notice, issuers can change credit limits at any time. It’s usually if a person’s payment behavior changes or there’s a major change to their general profile.

See, many issuers conduct account reviews from time to time, and often these reviews involve a credit pull. (Don’t worry, that credit pull shouldn’t affect your credit — since you’re not requesting financing, it’ll be considered a soft inquiry.) Now the results of that credit pull could wind up working out in your favor: If your score has improved, you may be awarded a higher credit limit, or even a special offer to sign up for a more premium piece of plastic.

But sometimes it can work against you: If your score has gone down, your credit limit may get slashed.

 

“Most issuers review their customer’s credit at least monthly and adjust credit limits if there is a significant change,” said Eric Lindeen, vice president of marketing for ID Analytics in San Diego, California, which offers fraud prevention tools and credit risk management scores to issuers. “Limit increases require confirmation of ability to pay, which is why they keep asking for your income. Many factors can be considered when lowering the credit limit, including late payments or even high-risk product choices.”

Sometimes, too, issuers are responding to regulatory pressure.

“Issuers may even reduce limits in response to a regulator’s concern that they are overexposed to potential credit losses,” Lindeen said in an email. “Since consumers with lower credit ratings represent a higher risk to the institution, those would be the consumers most likely to see their limit reduced.”

In other words, it’s totally possible for a credit limit to get slashed on a card in good standing due to other negative information on your credit reports, like high balances or missed payments on another card, for example.

Now, we can’t confirm whether a credit score drop is behind the credit limit decrease you say you’ve experienced specifically, since, of course, we don’t know your credit score. (You can see where your credit stands by viewing two of your scores for free, updated every 14 days, on Credit.com.) We reached out to your issuer, Synchrony Financial, and they were able to confirm that, while certain credit card terms, like your payment due date, don’t change due to your credit scores, “credit lines are set/approved/adjusted based on multiple factors, including credit score, use of account and repayment history.”

The spokesperson didn’t immediately respond to a request for comment on how Synchrony may notify a cardholder that their limit has changed. But, in any event, it’s a good idea to call them up and ask about your alleged credit limit decrease.

“We encourage an accountholder to contact us directly with any questions or concerns about their account,” the spokesperson wrote. “This gives us an opportunity to research their specific inquiry.”

That’s actually a good rule of thumb for anyone who encounters a similar problem: If the terms on your credit card account change, you can always call your issuer to find out the specific reason. And, if you’re unhappy with the modifications, you can ask them to reconsider. Just be aware that this request might result in a hard inquiry on your credit report, which can ding your credit scores, since they may want to look at your credit again before making a final decision — and this time, you’re asking.

Image: BraunS

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