Credit limit reduction is a baffling issue for most cardholders. Sadly, a bank can reduce the permissible limit even without notifying you. Generally, it may happen in two cases - if you have not used your card for few months or your credit score has been poor for several months. The extent of reduction is subject to terms and conditions of the bank.
However, this issue can be dealt with successfully. All you need to do is to follow certain things in this regard. Here are some important things that will help you know reasons behind credit limitations and ideas to fix them.
To begin with, you should contact your bank to know about possible reason behind credit reduction. If it reasons poor credit ratings as a potential factor for the reduction, then you should try fixing them. For this, consult credit bureau agencies and ask for your credit reports.
Generally, the reports detail outstanding balances on your cash card. If they are really worth fixing, consult your bank and explain your financial standing. If there has been increment in your income lately, do mention it to your bank. A growth in income is a surefire way to keep your bank from lowering your credit limit.
Terms and conditions regarding the limit reduction differ from bank to bank. For instance, HDFC Bank reduces the limit, if you may have not used your card for few months. Axis Bank reduces the limit, if the cardholders violate norm regarding good credit standing. This means, if you continue keeping your credit rating poor for several months, the bank may reduce your credit limit up to certain extent.
You should use your card wisely. Do not indulge in overspending. Make sure you are using your cash card at least once in a month. This will convince your bank that your card is being used. The issue of credit reduction does not occur, if the card is used frugally and in needs only.
Why banks lower down credit limit?
Basically, the banks reassess their risk tolerance occasionally. For this, they apply unexplained reductions to maintain their credit card standards. They also impose key terms regarding the reduction. For example, if outstanding balance is not paid on time for several months, the reduction follows. As said before, these terms differ from bank to bank.
So, you should avoid carrying huge outstanding on your card. Do not overspend it. Pay your balance on time. Always keep your credit balance as low as possible. They are some effective ways to avoid facing reduction on your card.
Dinesh Jha has been working as SEO content writer for years. He writes articles on various topics including finance, health subjects, credit and others. He is also freelancing his work as ghost writer for various clients.