Financial Fallout

• As the economy worsened during the 2008 financial crisis, credit card companies worked to protect themselves from consumers having access to money they could not afford to pay back. In 2009, about 20 percent of credit card companies had reduced the limits of account holders who were considered prime, that is, had great credit scores. Sixty percent of the banks had done this for the non-prime borrowers. In addition to reducing limits, the banks close inactive accounts and those with zero balances.
  
  

Read Your Credit Card Agreement

• The same agreement that gives banks the right to review your account and credit habits to increase your limit is the one banks use to justify decreasing limits. Read your credit card account agreement to determine what rights you have and whether your bank uses language such as "reserving the right to adjust, increase or decrease your credit limit" or "We can change your credit limit at any time." Many agreements give banks room to change the agreements at any time.
  
  

Typical Triggers

• For the most part, the 2008 increase in credit limit reductions was a reaction to strained financial markets and growing unemployment. However, you can trigger a credit limit reduction by paying late, going over the limit or having bad credit practices with other creditors. In addition, people who may have an inactive card because they want it for emergency purposes or people who pay their bill in full every month are vulnerable to a lowering of their credit limit.
  
  

Protect Yourself

• If your bank has reduced your limit or your account is inactive and you are at risk of a reduction, take precautions to protect yourself from a ding in your credit score. Because your credit score is based in part on the percent of your credit limit usage, a reduced rate will make it look like you use proportionately more of your credit. Keep your limits low to avoid this. A good rule of thumb is to keep your balance around 30 percent of the limit. Also, banks are required to notify you of any change to your credit card agreement, so be on the lookout for such a notice. It may hurt your credit score if you close the account.
  
  

Shop Around

• If your limit is reduced and you think it's unfair, attempt to work it out with your bank or card issuer. If necessary, speak with a manager or someone in the retention department. If that doesn't work, shop around for a potential balance transfer. Keep in mind that a zero balance is also a risk factor for credit card companies closing accounts.