Thread: Help! Citi reduced my credit limit by $5,000!

Hi everyone, new to the forums, just wondering if anyone has some advice on how to deal with this situation.

I received a call from Citi Cards today advising me that I was delinquent on my account. In an effort to save some money this month I was going to pay just above my minimum payment.

By accident I ended up somehow paying short by about $10.00. The csr who I spoke to was helpful enough, we paid off the missing amount and he was kind enough to waive my late charge (so he says). I do have a high balance that I am trying my best to pay down, and no longer use the card very much.

I logged on to my account online just to double check everything tonight and make sure everything is all set, and to my shock my credit limit was slashed by about $5000.00.

When I called to ask about this they stated it was automatically done by the system because of my late payment. They were not willing to override this. I get that it may have been automatically done, but to not have the courtesy to override this for an honest mistake and for a good customer??

I have been an excellent customer for 5 years with this card, NO late payments until the mixup this month. With the decrease they have put me very close to maxing out this card. I had no intention to run up the balance, but it was good to know I did have some extra room there for emergencies if needed.

So to make a long story short, they cut my limit $5000.00, put me pretty close to my max, and made me quite ticked off - prompt payments, always over the minimum, and they're playing games for a missing $10.00?? Seriously?

First, I would like to point out that in my honest opinion, it stinks that your credit limit has been reduced by such a large amount. I know a few people personally that would be over the limit if they lost $5k from their limit, so I would like to congratulate you on managing your finances better than that. I would however, like to try to put into perspective the banks automatic decision to reduce your credit line.

The first and arguably most important fact that will affect the Bank's actions in this situation is the fact that your credit card is an unsecured debt. If you default, then it is up to them to collect what they can and sell the rest of the debt for a small percentage of what you owe them for fronting you the money in the first place, creating a loss for the bank.

The bank most definitely has a model to predict default of a borrower, and I would be willing to wager that a single delinquency is a very strong predictor of default risk. Said another way, people that have had a delinquency recently are more likely to default than those who haven't. If the bank's model's job is to limit the amount of loss experienced by the bank from default, then decreasing your credit limit to what you currently have on the card makes perfect sense! They need to know that you have both the ability and willingness to pay the debt off. If you cannot or won't pay the debt, than the amount they lose is highly dependent on how much they lend you. As such, waiting for you to re-establish your record of payment before allowing you to borrow any more is the safest bet for the bank.

This train of thought could be wrong, but based on my experience working in the financial sector I think there is at least some truth to this. Again, it totally sucks that your credit limit got slashed, but as Jeffy suggested, you could apply for another card, and you might do it soon before the late payment is posted to your credit report, to get back the limit you lost.

Best of luck and keep us posted!

A couple of years ago I paid my account using my bank's billpay electronic service but Discover misposted the payment. The error was discovered by discover and fixed but after the billing cycle ended. The late charge and penalties were reveresed but in Discover's world the credit department appeared to be as far removed from daily operations as Japan is from Brazil. What Discover apparentently does or did as may be the case in your situation was that once an account shows as being delinquent (correctly or not) they move rapidly to reduce their risk and do that by cutting credit lines. It my case it took some time before Discover corrected their own error and I just my other cards.

So my suggestions are to 1. call the issuer ask to speak to credit and explain what happened and ask for the line to be restored. It may be that easy. 2. its possible that they did an immediate account review triggered by the delinquency and saw erosion that concerned them. If thats the case then you may need to in effect for a credit line increase back up to your original credit. Probably worth the try if #1 doesn't work. 3. if those two item don't work then as was suggested reduce usage on this card and pay it down aggressively so the utilization ratio improves and is better reflected on your bureau report ( the higher utilization will be seen by your other creditors and could effect their decisions in their own account reviews). Best to act quickly to fix this if its fixable.

Good luck

Yeah, from a business standpoint, they sort of did the right thing. From their perspective, any hint of a risk, regardless of the amount, they have to take precaution. Sure, a $5,000 slash in your Credit Line seems like a huge deal to you, but it also also reduces their risk. All banks would do something similar as a precautionary measure.

You didn't mention an increase in APR, you're lucky they didn't increase that aswell. But you should be fine, just make payments, Citibank is actually good with forgiveness and you should be able to request and get approved for a CLI.

I think that a key thing to remember here is that a lot of what banks do is automated by computer systems. If you trigger the system, racking up a big balance very quickly, late payments, etc, then the system will take action.

Once a card has been closed or had a reduced credit line, you'll need to make sure your utilization is very low and that you have almost no inquiries to get back to where you were.

When I started building my credit I had three cards, 300 secured card from BOA, 1200 from citi and, 1000 from amex. I booked a family cruise on the citi card near the end of my statement closing date and paid it off in full by the due date. But little did I know at the time, AMEX does soft pulls and monitors what is going on with your other cards. When they got wind of my high balance they closed my card. I found out via email.

Even though I paid the citi balance in full, literally days after the statement closing date, and now had a utilization near 0%, AMEX refused to reopen the card because I had 4 inquiries on my report. The world of credit is very unforgiving. You need to stay on top of things to prevent anything from going south.