by Joseph Kenny | 06/20/09

Handling low credit limits is becoming the issue of the day. Many people have either experienced a reduction in their credit limits or are already carrying balances close to their current credit limits.

So what do you do when this happens? Are you out of options when you have a low credit limit or when you are nearing your limit? Here are some ways to handle these low credit limits.

Transfer Your Balance

One fast solution is to transfer your balance to another credit card. Ideally, you will be aiming for a credit card with a significantly higher limit so that you will not be moving into a similar situation. This move will be easiest if you already have a history of good credit. These transfers can do you a world of good.

First, you may be able to find a credit card with a much higher limit which would instantly take care of your problem of being too close to your credit limit. Second, when you transfer you can often get a good deal. You may qualify for an interest rate that is low or even a zero interest rate.

You will want to know exactly how long this beginning low rate will last and what transfer fees you will be subjected to. You may even transfer your balance to another credit card that you already have if it has a low balance and a favorable interest rate.

Be Smart With Your Credit

If you do happen to be in the group that had their credit limits reduced then realize that this happens for a reason. Your credit limit was probably reduced because you are being seen as more of a credit risk, and your credit card company is trying to shield itself from losses.

One sure sign that you are being smart with your credit is that you check your credit report on a yearly basis. This is your opportunity to find out exactly where you stand in the credit scoring community and to look for any possible error on your credit report. They may not happen often, but they do happen. If you do not take the time to work toward finding them and correcting them then who will?

Be Careful With Closing Accounts

Closing accounts sounds like a good idea. You may have paid off your balance, or you may have transferred to another card with more a more favourable credit limit and interest rate. Still, closing an account may come back to haunt you.

Your credit score is affected by how long your credit accounts have remained open. If you close one account in favor of a newer one then this will impact your credit score. The average age of your credit history will decrease and will not reflect as well on you.

When you close an account you also diminish your available credit. A part of your credit score is based on the ratio of debt that you have to your total available credit. This means that closing an account will decrease your available credit and will lower your credit score.

Handling lower credit limits is part knowing how to deal with them and part knowing how not to make things worse. Look into transferring your balance, be smart with your credit, and be careful with closing accounts so that your lower credit limit will not pose as much of a problem for you.