Credit cards are shrinking—not in size but in credit access. During a recent 30-day period, one in four credit cardholders—that’s nearly 50 million Americans—said their credit limits had been slashed or their credit cards closed. That’s because card issuers have been trying to reduce risk of nonpayment amid soaring unemployment and a deepening recession. Further credit cuts are likely, but you can take several steps to try to head off or reverse a credit cut.

Even though you may not need to draw on your full credit limit, lower credit limits hurt credit scores. “Credit utilization ratio”—a figure calculated by dividing a cardholder’s outstanding balances by the person’s overall available credit—is the second most important factor when calculating a credit score, trailing only that individual’s history of making on-time payments. When credit limits are cut, utilization rates shoot up even if credit card use has not changed. 

Many cardholders don’t even realize their credit limits have been lowered. Issuers generally are not required to provide advance notice, although they cannot charge a penalty for an over-the-new-limit card transaction unless they provide 45 days’ advance notice. Cardholders often overlook such a notice.

What to do: The most effective way to reduce the odds that a card’s credit limit will be lowered is to use that card regularly. A regularly used credit card is a source of revenue for its issuer, and issuers are not anxious to put revenue at risk. Consider putting a small automated charge, such as a monthly Netflix subscription or utility payment, on a rarely used credit card.

If your credit limit already has been lowered or your card cancelled, you can call that card’s issuer and ask it to reconsider…call your other card issuers and ask them to increase your credit limits…and/or apply for new credit cards to return your overall credit access to its prior levels. Issuers are hesitant to increase credit limits and issue new cards these days, however, so your odds of success may be limited until the economy stabilizes. 

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