What factors can trigger a credit limit cut on your card?

I was given this reason when I enquired about this and also recent reports suggest that the global downturn has been the main reason why banks are aggressively decreasing their risk exposure. To reduce their risk quotient, banks do not want to give easy credit. In fact, banks the world over have taken action to reduce their credit to rebalance their exposure to credit default risk. But then however, blaming the downturn is taking the easy way out. You need to relook at your own payment patterns to get to the real reason.

Credit card operation is subject to an agreement between the issuing authority of card, normally financial institution, and the card holder. Financial institution is the party fixing the credit wothiness of the card holder and will fix the credit limit accordingly to the card holder, it is a bilateral agreement between them. And if all of a sudden if the card issuing authority cuts your credit limit without intimating you is not at all justifiable, issuing authority shold have at least given notice to you about the cut and the reason for such cut as a natural justice.  If that has not been followed, you have a strong ground to approach your jurisdiction consumer forum for the damage caused to you and for reputation. This is only my personal view.

Credit limit on a credit card is dependent on factors like

1. ability to pay

2. willingness to pay

From these other important points like the industry, role, your payment track record, etc are derived to set the credit limit.

The recent recession has hit the financial services sector hard. Banks and other card issuers were forced to re look at their portfolio and re assess the credit worthiness of their borrowers to limit their risk as many of the big names in the world started collapsing and people started loosing jobs. One must understand that banks lend your money ( i.e depositors funds) as loans etc.

When the card issuer reduces the credit limit they normally send a communication to the card holders through a letter/SMS/email so one must update the correct details for communication time to time.

I agree with Sonam & Rashmi that payment track record is one important factor.

In addition, the current status of the particular sector, the employer (with regard to the financial stability, and more importantly the job security of the employee) matter a lot. There was a scenario when emolyees of IT sector got huge credit limits, and infact the lenders were running after these employees. after the recent recession and the factors like job insecurity, satyam episode, the lenders became more cautious and sceptical.

After all, this credit issue (sub prime) was the main factor for the recession today!!

SML plays a main role in finding the risk of stocks.

A credit is a credit. when borrowed either from his/her friend or a banker. All that counts for a person (giving credit) will continue to have faith on a borrower only, when he/she maintains their credit worthiness. Nothing more is going to matter for anyone who is going to give credit. So, it is necessary that one has to perform as a credit worthy customer to have his/her credit card priveleges continued smooth.