Pitfalls, Protections and Official Sources
Credit limit increases, reducing your limit and cancelling a card online
Australian rules on credit card limits: the ban on unsolicited limit increase offers, how to request or refuse an increase, reducing your limit or closing a card online, and over-limit fees.
In Australia a credit card issuer must not offer or invite you to increase your credit limit: under section 133BE of the National Consumer Credit Protection Act 2009, any communication that offers an increase, invites you to apply for one, or is given to encourage you to consider one is prohibited. You can still apply for an increase yourself, and the issuer must then assess whether you could repay the higher limit within three years. In the other direction, issuers must let you reduce your limit or close your card, must provide an online way to request either, must not try to talk you out of it, and must act on the request. For rewards cardholders, a lower limit is often a sensible safeguard, and closing a card that no longer pays its fee is straightforward.
This guide belongs to the pitfalls, protections and official sources section. It is general information, not legal advice.
The rules in one table
| Rule | NCCP Act section | What it means for you |
|---|---|---|
| No credit limit increase invitations | 133BE | No unsolicited offers, invitations or prompts to raise your limit, in any form |
| Contract must allow the limit to be reduced | 133BF | Every card contract lets you ask for a lower limit |
| Online capacity to reduce the limit | 133BFA | The issuer must give an online way to request a reduction |
| No discouraging a reduction | 133BFB | The issuer must not suggest you should not reduce your limit |
| Must give effect to a reduction | 133BFC | Your request must be acted on |
| Over-limit fees only with consent | 133BI | No over-limit fee or higher rate unless you expressly consented; you can withdraw consent |
| Contract must allow termination | 133BT | Every card contract lets you close it |
| Online capacity to terminate | 133BU | The issuer must give an online way to request closure |
| No discouraging termination | 133BV | The issuer must not suggest you keep the card |
| Must give effect to termination | 133BW | Your closure request must be acted on |
These rules apply to credit card contracts regulated under the National Credit Code. The detail on timing and method is in the Act and the National Consumer Credit Protection Regulations 2010.
Asking for a higher limit
If you want a higher limit, for example to cover a large planned purchase you will pay off, you apply. The issuer then:
- Makes reasonable inquiries about your requirements, objectives and finances and verifies them.
- Assesses whether the new limit would be unsuitable, including whether you could repay an amount equal to the full new limit within three years.
- Approves, approves a lower amount, or declines.
See how card limits are assessed. A higher limit also raises the commitment other lenders count when you apply for a home or car loan.
Why reducing your limit can help
- Borrowing capacity: lenders assess the full limit as if drawn. Illustratively, reducing a limit from $15,000 to $5,000 lowers the assessed monthly commitment over three years at 20.99% from about $565 to about $188.
- Fraud exposure: a lower limit caps how much can be spent before you notice.
- Spending control: a limit closer to one month's spending makes it harder to drift into carrying a balance.
On a rewards card you pay off monthly, a limit of one to two months of typical spending is often enough. Allow for larger bills, such as insurance or travel, you plan to put on the card.
How to reduce your limit or close a card
- Log in to your issuer's app or internet banking and look for "credit limit" or "close card" settings. The online request option is required by law.
- Before closing: redeem or transfer points, cancel recurring payments linked to the card, and update merchants with a new card. See points expiry and cancelling a card.
- Pay the balance in full, or arrange how the remaining balance will be paid. Closing stops new spending but the debt remains until repaid.
- Keep the confirmation. Check your next statement and your credit report to confirm the account shows as closed.
- If the issuer delays, tries to dissuade you or does not act, complain to the issuer and then to AFCA. See complaints and official sources.
Over-limit transactions
Some transactions can push a card over its limit, such as pending authorisations or recurring payments. Section 133BI means you cannot be charged an over-limit fee or a higher rate for exceeding the limit unless you expressly consented, and you can withdraw that consent at any time. Issuers may also be required to notify you when you exceed the limit. If you never consented, an over-limit fee should not appear; if it does, ask for a refund.
Worked example: tidying up three cards (illustrative)
Sam holds three cards: a premium rewards card with a $20,000 limit, a no-fee card with $8,000 and an old store-linked card with $3,000. Monthly card spending is about $3,000 and is paid in full on the rewards card. Sam plans a home loan application next year.
- Total limits: $31,000. Assessed commitment over three years at 20.99%: about $1,168 a month.
- Sam reduces the rewards card to $8,000, closes the store card and keeps the no-fee card at $3,000 as a backup.
- New total: $11,000, assessed at about $414 a month.
- Capacity freed: about $754 a month in the lender's affordability assessment.
Sam redeemed the store card's points before closing it.
Frequently asked questions
My bank sent an email saying I am "eligible" for a higher limit. Is that allowed?
A communication that offers an increase, invites you to apply, or is given to encourage you to consider one is a credit limit increase invitation under section 133BE. If you received such a message, you can raise it with the issuer and ASIC.
Can the issuer lower my limit without asking?
Card contracts generally allow the issuer to reduce a limit, for example after a review, subject to the contract terms and notice requirements. Ask for the reason if this happens.
Does closing a card wipe my points?
Usually yes. Redeem or transfer them first.
Does reducing my limit hurt my credit score?
Your report shows the limit, so it will show the lower figure. Lenders generally view lower total limits as a lower commitment.
Sources and where to check
- Federal Register of Legislation — National Consumer Credit Protection Act 2009, Part 3-2B (sections 133BE to 133BW)
- ASIC — credit card obligations and reporting misconduct
- ASIC Moneysmart — managing credit card limits
- Australian Financial Complaints Authority — complaints about card issuers
