For more than two years, credit card companies have been slashing credit card limits dramatically.  The pace and severity of credit limit cuts has intensified recently, and many consumers with good credit have seen their credit limits decreased dramatically.

Unfortunately, a credit limit cut not only reduces your available credit; it can also severely hurt your credit score as well.  The reason credit limit decreases hurt credit scores lay in the fact that credit utilization, i.e. the amount of your available credit you use, plays a large role in determining credit scores.  For example, a person with a $10,000 credit limit and a $4,000 balance is only using 40% of their available credit.  This isn't great, but it also isn't a huge negative. 

If, however, your credit limit is cut to $4,500, you'd be using 90% of your available credit.  This will make you appear "maxed out," and can severely hurt your credit score.  This, in turn, will make it more difficult to get a new credit card or a low rate home or auto loan.

Fortunately, consumers who act quickly can potentially avoid credit score decreases and actually save some money in the process.  The solution is to get a new 0% credit card before your credit report is updated.  Aside from providing you with additional credit, a 0% credit card can be used to transfer high rate balances, which can help you save money on interest.  Additionally, your new line of credit will reduce your overall credit utilization, which can help you prevent a dramatic credit limit decrease.