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Reducing your credit limit: Is it a good or bad idea?

From increasing your borrowing power for other loans to decreasing your temptation to overspend, discover the pros and cons of reducing your credit limit.

Updated

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’re unsure, this guide breaks down the potential positive and negative impacts of lowering your credit limit. You’ll also discover the steps you need to reduce your credit limit and find a list of the contact details for the major credit card issuers in Singapore.

The positive and negative impacts of reducing your credit limit

Here are some of the pros and cons you should consider before you contact your credit card issuer to lower your credit limit.

Positives of reducing your credit limit

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 balance. Instead, you can request a more reasonable credit limit that will prevent you from overspending and collecting a debt that you may struggle to repay. If you are having trouble clearing a large credit card debt that’s collecting interest, you could consider transferring it to a card with 0% on balance transfers to pay it off interest-free for an introductory period.

If you’re planning to apply for another line of credit (such as a credit card, loan or mortgage), reducing your credit limit could help you apply for a higher limit on your new product. This is because lenders consider your existing debt when assessing your application and determining your approved credit limit.

Downsides of reducing your credit limit

Lowering your credit limit can restrict your spending power, which could be inconvenient if you need to cover large purchases or emergency costs in the future. If you want to give yourself the option of a larger credit limit in the case of emergencies, you should stick to a monthly budget that you know you can repay in full each statement period. That way you’ll have access to a higher credit limit if necessary, but can keep your regular costs under control.

In Singapore, lowering your credit limit and your ‘credit utilisation ratio’ don’t impact your credit score because your balances aren’t recorded on your credit report.

How to reduce your credit limit

If you’ve weighed up the pros and cons and decided to reduce your credit limit, these are the steps you can follow to get started:

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

Contact details for major credit card issuers in Singapore

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

BankPhone number
American Express1800 299 1997
Maybank1800 629 2265
Citibank6225 5225
Standard Chartered Bank6747 7000
HSBC800-HSBC NOW
Bank of China (BOC)1800 338 5335
DBS1800 111 1111
Oversea-Chinese Banking Corporation (OCBC)1800 363 3333
United Overseas Bank (UOB)1800 222 2121

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

Yes, you can but most Singapore financial institutions limit you to one application for a credit limit increase every three 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 application form. You can find this document on your credit card provider’s website.

Conclusion

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 three 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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