Credit Card Spending Limits
If a credit card issuer gives you a high spending limit, it usually means that you are credit-worthy in the card issuer's eyes. Generally, the better your credit score, the more credit you get. However, after the sub-prime mortgage crisis, credit card issuers took note of the turbulent times and started decreasing credit card spending limits, according to SmartMoney.
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Effects
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Reducing your spending limit reduces your ability to spend. If an emergency comes up, you may not be able to turn to your credit card as you once did. If you do go over your limit, your credit card issuer will probably hit you with penalties, according to SmartMoney.
Your Credit Score
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Having a reduced credit-spending limit can hurt your credit score. Part of your credit score is based on the amount of available credit you have. The closer to being maxed out on your credit card, the worse it is for your credit score. You could be carrying a $5,000 balance on your card, for example, which would have been fine when your credit-spending limit was $15,000. But, if your limit is slashed in half to $7,500, the same $5,000 balance is no longer fine as far as the credit bureaus are concerned, points out Gerri Detweiller, an online credit advisor for SmartMoney.
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Prevention/Solution
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To keep your spending limit intact, take measures to protect your credit line. Lowering or eliminating your credit card debt is the best step you can take, according to SmartMoney.
Check Your Mail
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Don't throw away mail from your credit card issuer without reading it. Credit card issuers must notify you if they are going to lower your limits. In addition, get into the habit of reading your credit card statements so that you will know if your card issuer lowered your spending limit.
Warning
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According to SmartMoney, credit card issuers can cut your credit-spending limit below the balance you have on the card. Since July 2010, however, they must send you a notice 45 days in advance of lowering your spending limit. Prior to the CARD Act, credit card issuers could change the limit without notice.
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