Many times it is seen that some credit card companies reduce the limit of customers’ cards. Let us tell you that every bank practices reducing the credit card limit. However, any bank does this only under certain circumstances. Let us know when a bank can reduce the credit card limit (How to Use Credit Card).
1- On payment default
If we look at the data of the Reserve Bank of India, by March 2023, credit card default has increased to Rs 4072 crore. If you delay paying your credit card dues many times, then the bank sees you as a risky customer. It feels that you do not have enough money to easily repay the credit card dues and the bank reduces your credit limit.
2- Carry forward the dues by paying the minimum dues
There are many people who carry forward their dues to the next month after paying the minimum dues of the credit card. If you do this two-three times, then it is okay, because in such a situation you pay interest on the dues, which earns the credit card company. But if you make it your practice, then the outstanding debt on you will keep increasing and it is possible that you get caught in a debt trap. In such a situation, it may be difficult for you to repay the loan, which is a big risk for the credit card company. In such a situation also, companies reduce the limit of the customers’ cards.
3- Using more credit limit than necessary
There are many customers who use their credit card limit more than required. The limit given to you and the amount you use is called utilization ratio. If this utilization ratio becomes high, then also the credit limit can be reduced. Suppose you have a limit of 1 lakh rupees on your card and you are using a limit of 80 thousand to 90-95 thousand rupees every month, then this is a negative point for you. Actually, credit card companies see such people in such a way that these people take too much credit i.e. loan and can be risky users. In such a situation, many times the credit limit of the customers is reduced.
4. Using too many credit cards
Sometimes some customers take several credit cards one after the other. This increases their total limit rapidly. Suppose the credit limit of one of your cards is Rs 1 lakh and you have a total of 10 credit cards, then your total limit becomes Rs 10 lakh. Now if you use these cards too much, then the bank will feel that you are too dependent on loans and are a risky user. In such a situation, the bank can reduce your credit limit.
5- Use the card very little
Many times there are customers who get a credit card but they do not know how to use it properly or do not like it. The result is that they use the credit card very rarely. The credit limit of such customers is also reduced by the banks because the banks will benefit only if the customers use their cards a lot.
