The bank sets a credit limit on each credit card having regard to the financial conditions of the cardholder in each case. This is the maximum amount that the cardholder may spend or withdraw cash with the credit card. The bank will usually refuse to approve a card transaction or cash withdrawal if the credit limit is used up or exceeded (section 29.1(e) of the Code of Banking Practice).
Recently, in reducing the risk of loss caused by frauds and scams relating to credit cards, a bank is required to obtain the cardholder’s prior consent before increasing the credit limit of the card. The cardholder’s prior consent is not required for reducing the credit limit of the card (section 29.1(f) of the Code of Banking Practice).
A cardholder may also ask the bank to reduce or increase the credit limit of its card. Reduction of limit is relatively straight-forward but increase of limit is subject to the bank’s decision, having regard to the cardholder’s financial position (section 29.1(a), (e) and (g) of the Code of Banking Practice).
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