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Reducing Your Credit Limit: Is It A Good or Bad Idea?

Should I reduce my credit limit?

Depending on the situation you’re in, reducing your credit limit could either limit your spending power or help you take control of your finances. If you find yourself struggling to repay your balance each month and want to limit your temptation to spend, you can use this guide to find out how you can reduce your credit limit with most Australian credit card issuers.

Unless you agree to receive credit limit increase invitations, the power to raise or lower your credit limit is up to you. If you’re unsure whether you should lower your credit limit, read on to learn some of the main reasons cardholders lower theirs:

Main reasons why people reduce their credit limit

  • Reduce your credit limit to pay off your credit card. If you’ve maxed out your credit card in the past or find it hard to stick to a budget, you can curb the temptation to spend by reducing your credit limit as you pay off your credit card.
  • Increase your borrowing power on other loans. Reducing your credit limit on one credit card could mean you’re eligible for a higher credit limit on another credit card or a mortgage. Consider where the higher credit limit will be more useful and base your decision on that.

  • Consider your planned purchases. If you’re considering lowering your credit limit, it’s also important to factor in whether you have any planned purchases coming up. Even if you want to lower your credit limit, you’ll want to make sure it doesn’t completely limit your spending power, especially if you use the card for emergencies or have a high-ticket purchase coming up.
  • image showing the two paths which you can take for your credit situation

Steps to reduce your credit limit

  1. Contact your bank provider (via phone or local branch).
  2. Request the credit limit decrease
  3. Your credit limit will be updated within 24-48 hours

How to reduce your credit limit

You can use the contact details below to request a credit limit decrease:

BankPhone number
American ExpressNumber on the back of your card.
ANZ13 22 73
Bankwest13 17 19
Bank of Melbourne13 22 66
Bank of Queensland1300 55 72 72
BankSA1300 784 934
Citi13 24 84
Commonwealth Bank13 22 21
HSBC132 1521300 301 168 (HSBC Premier)
Latitude Financial Services1300 552 079
NAB13 22 65
St.George1300 784 934
Westpac1300 130 961

If I reduce my credit limit now, can I apply for a higher credit limit later?

Yes, you can but most Australian financial institutions limit you to one application for a credit limit increase every six months. Please note that you’ll need to go through a credit check each time you apply for a credit limit increase.

The other option is to complete and send in a credit limit increase/decrease application form. You can find this document on your credit card provider’s website.

Reducing your credit limit can be an alternative to cutting up the card. Keep in mind you can only apply for a credit limit increase every six months with most cards so make sure you don’t need the money before you make the call to lower your limit – it may be a while before you can raise your limit again.

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Sally McMullen

Sally McMullen is an editor at finder.com.au who is a credit cards, frequent flyer and travel money expert by day and music maven by night.

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8 Responses

  1. Default Gravatar
    williamApril 24, 2018

    I have just checked up on my credit score and I find that I am a bankrupt which is incorrect
    is it possible for me to find out who made me bankrupt ?? Many Thanks.

    • finder Customer Care
      AshApril 24, 2018Staff

      Hi William,

      Thank you for visiting finder.

      You may request for your current Credit File at this page. Then you can read this page for your guide in identifying the incorrect entry on your file.

      Moreover, on this page you can follow the instructions on how you can remove the wrong information from your Credit File.

      I hope this helps.

      Let us know if there is anything else that we may assist you with.

      Cheers,
      Ash

  2. Default Gravatar
    RachelDecember 13, 2017

    If my credit card is already at the minimum 6000 product limit is there any way to lower it or should I transfer to another card that has a lower product limit if I’m wanting to lower the limit as I pay it off?

    • finder Customer Care
      RenchDecember 14, 2017Staff

      Hi Rachel,

      Thanks for your inquiry.

      Unless you agree to receive credit limit increase invitations, the power to raise or lower your credit limit is up to you. If you’ve maxed out your credit card in the past or find it hard to stick to a budget, you can curb the temptation to spend by reducing your credit limit as you pay off your credit card.

      You may follow these steps to reduce your credit limit:
      1. Contact your bank provider (via phone or local branch).
      2. Request the credit limit decrease
      3. Your credit limit will be updated within 24-48 hours

      Hope this information helped.

      Best regards,
      Rench

  3. Default Gravatar
    PaulFebruary 17, 2016

    Does it increase my credit score on websites like GetCreditScore to decrease my limit on my current cards?

    I read somewhere that they consider your current available credit limit when determining if you are able to get a new card and the more credit you can already access to worse off they rate you.

    Can you clarify?

    • finder Customer Care
      SallyFebruary 19, 2016Staff

      Hi Paul,

      Thanks for your question.

      The impact that decreasing or increasing your credit limit will have on your credit score will depend on your credit history and ability to repay.

      If you’re struggling to repay your balance, reducing your credit limit to curb your temptation to spend more could help. So long as you’re able to make timely repayments and demonstrate that you’re a low risk applicant, reducing your credit limit could help improve your score.

      For more tips on improving your credit score, please see our guide.

      I hope this has helped.

      Cheers,

      Sally

  4. Default Gravatar
    PhilFebruary 16, 2012

    Hi, How do I go about reducing my credit limit on current credit card? Have tried via websites but can’t find how !! Do I need to go into a Westpac branch? Comments appreciated. Thanks Phil

    • finder Customer Care
      JeremyMarch 2, 2012Staff

      Hi Phil,

      Please contact your financial institution by phone or in person.

      Cheers.
      Jeremy

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