It seems like some individuals are always searching for ways to increase the credit limits on their credit cards. The reasons for doing so are varied, and might include a desire for greater day to day purchasing power, the need for an easy to access source of funds for emergencies, or even to lower an individual’s credit utilization ratio.
But sometimes a bank or credit union or credit card company will automatically raise a customer’s credit limit without ever being asked to do so. While this might seem a bit unusual, there are actually a few good reasons why your financial institutions might choose to do so.
Here are some reasons why your credit card issuer may automatically raise your credit card limit.
To Allow You to Spend More. Not surprisingly, the most common reason why a credit card company might raise your credit limit is to give you the opportunity to charge more on your card. This will allow them to bring in more revenue in the form of interest charges and possibly even late payment charges. Of course, just because you have more credit available that doesn’t mean you have to use it. In fact, having a higher credit limit without changing your buying habits can lower your credit utilization ratio, which can actually help your credit score.
To Keep Your Business. Even if your financial institution is willing to raise your credit card limit upon request, they understand that not everyone is willing to go through the effort of calling to make that request. Because your financial institution wants to prevent you from applying for a new account with a different institution in order to increase your spending power, they will sometimes automatically raise your credit card limit without you asking, hoping to preempt you from taking your business elsewhere.
To Incentivize You to Transfer a Balance. Many times an unrequested increase in your credit limit is done in order to give you an incentive to transfer an existing balance you have on another credit card. Sometimes this increase will be accompanied by a balance transfer offer at a preferential interest rate. If you choose to accept this type of offer, try to keep the amount of your balance transfer under the additional credit limit you’ve been given, in order to reduce any potential damage to your credit utilization ratio. Conversely, if you ever receive an offer for a balance transfer onto one of your credit cards, and are interested in taking advantage of that offer, call your credit card company to request that you receive a corresponding increase to your credit limit. After all, you might not want to do such a transfer if it ends up reducing the credit you have available.
It’s important to pay attention to all emails and correspondence that you receive from your credit card company. If they ever increase your credit limit without you requesting it, and you’re not comfortable with the higher limit, you can always call them and request that your limit be restored to its original level.
Tags: credit card advice, credit limit, credit line, increase credit
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on Friday, February 15th, 2013 at 3:31 pm and is filed under Managing Credit.
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It seems like some individuals are always searching for ways to increase the credit limits on their credit cards. The reasons for doing so are varied, and might include a desire for greater day to day purchasing power, the need for an easy to access source of funds for emergencies, or even to lower an individual’s credit utilization ratio.
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