I paid down my Capital 1 account significantly in effort to reduce debt and now they just lowered my credit limit to below the small balance that I owe - is this legal? What recourse do I have? Is it better to close the account altogether? Was I mistaken to pay down debt? It seems to have ruined rather than helped my rating.
Starting in the summer of next year, there will be a lot more restrictions imposed on credit card companies -- it will be harder for them to institute new fees, "randomly" lower credit limits and impose other changes adverse to cardholders. However, until that time, people are seeing a lot of the actions you have described above and there is very little that can be done about it.
It seems as though you were identified as an at-risk cardholder and as soon as you paid off a large portion of the debt, the credit card company saw its window to swoop in and reduce your available credit line. They did this because they didn't want to be responsible for any additional debt you may incur (and not be able to repay). Although the credit card company may seem like the bad guy in this situation, they are facing rapidly increasing delinquency rates and the only way they can improve their position is to institute fees and reduce the amount of outstanding credit that is at risk. Your only recourse is probably to call the company and ask to have your higher credit limit re-instated. It never hurts to try, but given the circumstances you have described, your chances of success are likely low.
It is unfortunate that you were trying to do the right thing and now your credit limit has been reduced and your credit score may be impacted. However, paying down the debt was a good thing to do. My advice is simply to try to pay down the balance on that card as quickly as possible. Generally speaking, you don't want the outstanding balance on any of your credit cards to be more than 30% of the available credit line.
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