Why do some credit card companies lower your credit limit with no warning?

Question

Why?

Will this also hurt my credit score significantly?

Also, can it ever go back up again?

This company, Juniper claims that it did so because I have too many new accounts open, and too much debt, which is BS at least on the debt part.

Are they afraid or something?

Anyways, I think this is completely rude, and shows absolutely NO faith in the customer. In anycase, they make money off of us, and a higher line means more money spent, and if anything they can make interest off of you.

SO, why the hell would they, if they had any brains, lower someone's limit?

That's showing a SERIOUS lack of trust.

Should I just close the account? THe limit is now at a pathetic $250, down from $1000. It's ridiculous, and this makes me lose respect in the company.

ALSO, I've actually paid in FULL about twice and was on good standing when this happened with them too.

Can other companies do this too, or does it vary?

This is just somewhat depressing.

Answer 1

Credit card companies have the right to raise or lower your limit, cancel your card, impose penalties on late payments, and change the interest rate you pay. That's the agreement you sign when you apply for a card. Remember that it is their card, not yours.

They told you why they lowered your limit. You have taken on too much debt and they are afraid you may be unable to pay it off. They lose money on customers who keep borrowing on new cards and eventually get completely over their head and can't pay. They are simply limiting their risk. The card company has no reason to trust you because instead of paying off the card each month, you went into more debt elsewhere. You have become a higher risk than before.

If you cancel the account, your credit score may drop even lower than it is. You can, of course, pay off the card and stop using it without canceling it. From what you say and also avoid saying, it appears that you are using more than one credit card and are not paying off the entire balance each month. Some of your cards may be maxed out to their limit. In other words, you are living beyond your means and are borrowing money at high interest rates to do so. Your spending habits do not permit you to pay your short-term debts as they come due and you are converting them to long-term debts. Interest rates charged on credit cards and the minimum payment they establish are designed to keep you paying for the rest of your life.

You would be wise to limit your charging on credit cards to the amount you can repay each month. Select the card with the smallest balance and pay it off in full. Then use it to make all purchases and pay the balance in full each month. meanwhile, select the card with the highest interest rate and pay it off as quickly as possible while you repay other cards as fast as you can. Use only the one card that you repay in full each month, so that the balances on other cards are going down without adding charges to them. This approach will get you to the point where card companies will be happy to increase your credit limit when you need it.

Answer 2

There are no guarantees on the continuation of initial credit limits. Lenders are most concerned with your ability to pay, and they run occasional credit report checks to see 'what's going on' with your financial wherewithall. If they determine that you've accrued too much debt elsewhere, they can and WILL lower your limits to protect themselves from possible default.

Sadly, I have the opposite problem. I regularly get credit limit INCREASES for which I have not asked. The old 'valued customer' line is used. I generally phone and ask that these limits be reduced to what I want.

Answer 3

Credit card companies make all the rules and can change them anytime they want. Just read the fine print. That's why i dont play with the snakes. Cancel all your cards and dont obsess with your fico (I Love Debt ) score.

Debt Free is definitely the way to be.

Answer 4

Captial One did the exact same to me..Their reason for the credit limit decrease was "because you don't use your card as much as you did when you first acquired it.".. STUPID!!!

I cancelled it 5 minutes after I opening the letter...

They actually offered to raise it back once they realized that a valued customer was about to cancel his card..The damage was already done so it was indeed cancelled....