The craze for credit card shopping is growing rapidly these days. Many users expect their credit card limit to increase over time, but what if their credit card limit suddenly decreases? The expectation is that if we increase our usage, the limit will also increase. But this sudden change can be surprising. It often happens suddenly, without any request, leading people to assume they've made a mistake. But what's the real reason behind this? Let's find out.

One major reason for this could be low card usage. If you don't use your credit card for months or only use it occasionally for small purchases, the bank may assume you don't need such a high credit limit. Banks and card issuers periodically audit customer accounts. This process may result in a reduced limit on a credit card that hasn't been used for a long time.

What happens if you don't make payments on time?

Not paying your credit card bill on time can impact your credit limit. If you make only the minimum payment for several months or carry a high balance on your card, the bank may consider you a risky customer. To reduce your risk, the bank may reduce your credit limit.

Banks look at your entire credit profile, not just your credit card. If you have a personal loan, haven't been paying your card payments on time, or have obtained a new credit card, this can lower your credit score and impact your credit limit.

Your income also plays an important role. Many banks periodically ask customers to update their income. If your income has decreased or the bank believes your loan repayment capacity is not as good as before, the bank may decide to reduce your credit limit. This doesn't happen with all customers, but banks do monitor these factors.

Sometimes it's not the customer's fault.
Sometimes a reduced credit card limit isn't your fault. Banks periodically review all their credit card customers and adjust the rules based on their risk profile and business needs. In such cases, even if you've always paid your bills on time, the bank may reduce the credit limit for some customers.

Another negative impact of a reduced credit limit can be on your credit score. Let's say you spend ₹35,000 per month. Your card limit was previously ₹200,000, but now the bank has reduced it to ₹70,000. Your spending will remain the same, but your credit utilization ratio will increase significantly because you'll be using more of your available limit.

If this ratio remains high for a long time, it can negatively impact your credit score. Therefore, if your credit limit is reduced, it's important to pay attention to your spending and credit utilization.

Contact customer service
Just because your credit limit has been reduced doesn't mean it can't be increased again. If your bank hasn't notified you via email or text message, you can contact customer service to ask why.

PC: NDTV