Should I Ask Credit Card Companies to Lower My Credit Limit?

by Neil Kokemuller ; Updated July 27, 2017
A lower limit is one strategy to corral bad spending habits.

Asking a lender to lower your credit limit is a mixed bag. It is potentially a wise move if you struggle with spending discipline. However, it is usually not a good move from a credit rating standpoint.

Process and Ramifications

As a card holder you can contact the credit card provider to request either a limit increase or reduction. If you decide a reduction is the right move, simply call the customer service number or send an email. Most credit card providers are fine with a reduction request, though you naturally can't reduce your limit below your current balance. Some providers automatically raise a borrower's limit after a period of responsible borrowing. If you don't want this to happen, you may have to alert the provider not to increase the limit without your approval.

Spending Discipline

A primary reason to lower your limit is to keep your spending under control. If you currently have a $5,000 limit and you are concerned about using it all, a reduction to $3,000 minimizes your borrowing capacity. While the best long-term solution is to simply curb your spending, a lower borrowing cap helps in the short-term. Plus, a lower limit may prevent excessive impulse purchases that you might make if the credit were available.

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Credit Score Drawbacks

From a credit rating standpoint, reducing a credit limit isn't usually a good move. In fact, many customers try to get limit increases to boost their scores. Your credit utilization ratio is the second-most important factor in a credit score, according to Experian. Lowering a limit on a card with a balance significantly increases your credit utilization ratio on that card, which hurts your credit score. For example, a $1,000 balance on a card with a $10,000 limit equals a 10 percent ratio, while a $1,000 balance on a card with a $5,000 limit equals a 20 percent ratio. It's better to have a low ratio than a high ratio,

Card with No Balance

The impact of a lower limit isn't as great on a card with no balance because the utilization ratio remains zero, regardless of the limit. Therefore, lowering your limit from $7,000 to $4,000 has no effect on your single-card ratio. According to a column on the Experian website, "because you have a zero balance, lowering the credit limit will not cause an increase in the utilization rate, so (it) might not affect your credit scores." If you do make a purchase on the card, however, you're better off having a higher limit than a lower one.

About the Author

Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.

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