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The conventional wisdom I've heard is that spending close to your limit and paying the balance off in full each month will often lead to the credit card company increasing your credit limit automatically. I assumed this was because they expect that given an increase, you'll spend more and earn them more merchant fees. In this comment, Dilip gave another (related?) reason, in that your credit card company may do this to preempt you moving to another company, who presumably would give you a higher limit from the beginning.

Obviously, the effect of utilization on your credit score means you're probably better off asking for an increase instead of having high levels of utilization month after month in the hope your limit increases, but is this an actual phenomenon? Is it a standard practice for credit card companies to raise the credit limits of "deadbeats" who spend close to their limits?

I've never had this happen personally, because the one time my credit limit has been raised without my prompting, my utilization was low. On my very first credit card, I had high utilization (around 90%) and a low limit, but I had to ask the credit card company to raise my limit; it never happened automatically. Now, my utilization is well within the 1-20% range, so in the event my credit limit is raised without my asking, it still doesn't tell me anything about the "conventional wisdom."

  • Can banks in the US actually raise the credit limit on your CC without asking your approval first? – Victor Jun 5 '13 at 21:40
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    @Victor Hmm. I have had my credit limit increased without a direct notification once in the past, but that was several years ago and it hasn't happened since. However, I usually ask for an increase every six months, and since my utilization is around 5%, I doubt I'm eligible for an automatic increase based on that (if it exists). – John Bensin Jun 5 '13 at 21:56
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    @Victor - absolutely: I've had it happen several times. – warren Jun 6 '13 at 19:49
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    I've had my limit increased without me asking first, but they did send me a notice after the fact, telling me I could opt out of it. We pay off the balance each month, and usually spend no more than 25-30% of the limit in a month. That means we may actually have a balance as high as 60% of the limit between the billing date and the payment date 3 weeks later. Never been an issue, and I thought credit score was based on the carried balance, rather than what you spend each month anyway. – Rick Goldstein Jun 14 '13 at 18:47
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    It depends upon your credit card issuer - and I believe it depends upon their credit review policies. For example - Amex and Discover both keep on automatically increasing my credit limit, where as Chase does so for one card (United, ridiculously high limit) but not for other (Amazon, ridiculously low limit) - even though I heavily use Amazon and rarely use United. However - every time they do increase the limit I see a soft request on my credit report. I always pay in full and at least for amazon have occasionally reached close to 70% utilization. – YetAnotherUser Jun 14 '13 at 19:13
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+50

As many comments implied, each bank probably has its own rules on what conditions create an offer of higher credit or automatic increase. My anecdotal evidence over the years confirms that a track record of charging right to a card's limit and then paying in full, resulted in the increased line. The card issuer is able to do a "soft pull" on the credit report which does not result in an inquiry, for the fact that they did it on their own and not at your request. It's in their best interest to do this (a) as they increase their potential profit by gaining a higher share of your card spending, and (b) to avoid losing you to other card offers if you have need to spend more cash each month.

The high utilization may hurt your score in the short run, but it adjusts as soon as you bring that down. Credit scoring is real-time.

  • The reasoning for why a credit card company would do this makes sense; since I don't spend close to my credit limit on any card at the moment, this probably isn't something I'll experience again, but the information is good regardless. – John Bensin Jun 18 '13 at 19:04
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    Thanks, John. It would be an interesting experiment to enlist some number of people to agree to charge one card to near the limit for say, 6 months, and see if this has the effect we suspect. – JTP - Apologise to Monica Jun 18 '13 at 19:41
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    Well sort of real-time. It's real-time to the extent that if all of your balances are up to date along with payment history. I have seen cards take two months to report sometimes. – Brian Jul 1 '14 at 15:05
  • @staticx - As an engineer, I should know better than to misuse such an expression. Scores change as each account reports a status. So, when my new bill is cut, within a few days my score will reflect a change, if any. – JTP - Apologise to Monica Jul 1 '14 at 15:20
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My experience in getting an automatic increase is before the 2007-2008 crisis. I never asked for an increase, but over a 15+ year period all my credit cards increased their credit limits. Some by sending me a letter, some by telling me with a one line comment on a monthly statement "Congratulations..."

During the crisis one card reduced my limit, I suspect it was because of low utilization. They never said why, but the only one that dropped was the one I used the least.

In the last few years I have asked for one increase online and it was instantly granted. In another case they sent me a letter in the mail, but needed me to call them. It was a way to collect updated employment and salary information, because their facts were 15 years out of date.

I would think that the calculus has changed for the banks post-crsis. I also think they are making adjustments to the new fee structures and the rise of debit cards. It is unclear how they will manage the process of increasing credit limits based on usage patterns.

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    +1 The one time I received an automatic increase was post-crisis (2009), so I haven't personally seen any change pre- and post- crisis. A good answer, though, and not worthy of a downvote in my opinion. – John Bensin Jun 18 '13 at 19:02

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