Why was my Credit Limit Increase Denied?

Question

I applied for a credit line increase from Capital One a few weeks ago. A few days ago I got a letter indicated that the increase request was rejected. The two reasons stated were:

• Primary cardholder current accounts not used enough
• Primary cardholder insufficient experience with high lines of credit on Capital One Accounts

I have two cards with Capital One, both with roughly the same limit. That limit is about 10% of my (household) annual income--about 5% each. I have one other major card, an American Express, which adds roughly another 2.5% of my annual income.

I use one of the cards for everything I possibly can, as it has the better rewards. I pay it off in full each billing cycle. I pay off the other cards in full each month, but I only use them for specific purchases (e.g. Costco only accepts Amex, some old subscriptions still charge to my other Capital One card).

My Equifax credit score is 813 (per the letter).

Needless to say, I was surprised to get this rejection letter. I have excellent credit, no revolving debt and a low (I think) ratio of credit limit to income. I also use my credit card a lot, regardless of the first bullet point above.

Does the company dislike customers who don't pay any interest or fees? Or is 12.5% of income a fairly standard credit limit across all cards?

Answer 1

I think they gave you the answer: You haven't previously shown that you can run that particular card up to (near) its existing maximum and then pay it off, so they don't have a strong indication that you can handle that large an unsecured loan. Generally, requests to have the limits raised when there isn't evidence that the customer is finding the current limit inconvenient are going to be considered suspicious.

Remember, a great credit rating does not require that they consider you a good risk -- it's just one of the things they consider.

Why do you need the limit raised? Have you tried contacting the bank's credit department directly and discussing what they will or won't let you do?

Re paying off the card every month: Remember, they do get a processing fee from the vendor. They'd prefer that we paid interest (I'm told the term of art for those of us who don't is "deadbeats"), but they certainly don't lose money when we don't. And they'd generally rather have us be loyal customers who MIGHT someday pay interest, and who are bringing in fees, than have us go elsewhere.

Answer 2

The bottom line is that you are kind of a terrible customer for them.

Granted you are far better than one that does not pay his bills, but you are (probably) in the tier right above that.

Rewards cards are used to lure the unorganized into out of control interest rates and late payments. These people are Capital One's, and others, best customers. They have traded hundreds of dollars in interest payments for a couple of dollars in rewards. The CC company says: "YUMMY"!

You, on the other hand, cut into their "meager" profits from fees collected from your transactions. Why should they help you make more money? Why should they further cut into your profits?

Response to comment:

Given your comment I think the bottom line is a matter of perspective. You seem like a logical, altruistic type person who probably seeks a win-win situation in business dealings. This differs from CC companies they operate to seek one thing: enslavement. BTW the "terrible customer" remark should be taken as a compliment.

After you get past the marketing lies you begin to see what reward programs and zero percent financing is all about. How do most people end up with 21%+ interest rates? They started with a zero percent balance loan, and was late for a payment.

Reward cards work a bit differently. Studies show that people tend to spend about 17% more when they use a reward card. I've caught myself ordering an extra appetizer or beer and have subsequently stopped using a reward card for things I can make a decision at the time of purchase. For people with tight budgets this leads to debt.

My "meager" profits paragraph makes sense when you understand the onerous nature of CC companies. They are not interested in earning 2% on purchases (charge 3% and give back 1%) for basically free money. You rightly see this as what should be a win-win for all parties involved. Thus the meager in quotation marks. CC companies are willing to give back 1% and charge 3% if you then pay 15% or more on your balance.

Some may disagree with me on the extracting nature of CC companies, but they are wrong. I like him as an actor, but I don't believe Samuel Jackson's lines.