Chase Says Credit Limit Increase Is An Opportunity!

June 15, 2007

A credit card limit increase may be an opportunity, but for whom?

Unsolicited Credit Limit Increase
I received a letter in the mail today from Chase announcing they had increased the limit on my credit card.  I had to laugh at the first two sentences of the letter:

“You deserve the opportunities that come with a larger credit line. Your increased credit line of $13,000 gives you more flexibility to enjoy the opportunities in life with less worry.”

I didn’t ask for this increase, so why was it granted?  Chase proudly claims it’s for more opportunity.  I now have greater purchasing power, however, what they don’t mention is that their opportunity for making money increased right along with my spending power.

Credit Card Prestige?
I continued to chuckle as the letter went on:

“Use your Chase credit card for all of your every day needs, as well as for the larger purchases you’ve been waiting to make. So take pride in the prestige of using your Chase credit card and enjoy the potential of your credit line. Its our way of saying thanks to you.”

They remind me that my new credit line will allow me to buy the things I’ve always wanted but couldn’t and will make me feel more prestigious.  Wow, I never knew a credit card could get me what I wanted and make me feel better about myself.

They wanted to offer me these benefits to say thank you for using their credit card. Well that’s certainly one way to spin it.  Another way to put it is they want me to feel good about spending more money in hopes I’ll stop paying off my balance in full each month and start paying finance charges.

Sorry Chase, not going to happen.  Thanks for the credit limit increase, but I already have enough “opportunities” to spend money in my life, I don’t need any more.

Ben

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Ben

Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn’t like the other kids… His addiction to personal finance has paid off for his family and now he’s helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.


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Comments

20 Responses to Chase Says Credit Limit Increase Is An Opportunity!

  • Mike

    I understand eveything that everyone is saying and I mean there’s nothing wrong with increasing your FICO score, getting rewards points, and other things that others have and will mention and I guess its because I write contracts for a living. But, when you get a credit card you’ve entered into an agreement (a contract). Usually when there are any funding increases in a contract its a bilateral agreement between you and the other contractor (your company and another company). This is definately a standard practice for banks to increase credit limits but just because its a “standard practice” doesn’t make it ok. If you want an “automatic inrease” then a bank should send you a letter stating, “would you like an automatic increase, if so, respond…etc, etc.” A bank (any company) can’t just say, we are unilaterally changing the terms of your contract on your behalf to benefit you. Logic like that makes for a very poorly written “bilateral contract” and as credit cards are, in a way, bilateral contracts (agreements between you and a bank) they should treat them as such. I just wanted to share my point of view from a contracting perspective.

  • Neo

    I dont understand why people are so furious with chase increasing your credit limit. Just because the bank has increased your credit limit doesnt mean that you have to use all of it. You are the one, not the bank who is responsible for your debt. If you think you cant control yourself when you have a higher purchase limit, there is an alternate way. Request Chase for an Add-on card for your account and set the limit for that add on card as whatever limit you want. You will stil have the overall account credit limit but you wil not be able to spend more than what you have set for your add-on card. And the limit on add-on card will not increase automatically.

    Keeping the higher credit limit can help in in a number of ways. Just in case you want to make a big purchase, ( when you have enough cash in your bank account) , use the card to make the purchase. You will earn the rewards points or cash back depending on your card. Also you get an interest free long for around a month ( until chase send you the bill with a due date usually 20-25 days from the bill date. ) If you plan your purchase carefully and make the purchase on the next day after your billing date, you will get this increased to closer to 2 months of interest free loan. And keep the money in your savings bank account and earn money for that. Pay the card bill using automatic payment from your Savings account and you don’t have to worry about paying interest of being in debt.

    Additionally having a higher credit limit means a positive effect on your credit score. A higher credit limit will increase the credit score provided you keep the utilization low. This will in turn get you more savings by being easier to qualify for lower or other 0% interest schemes for loans ( especially car loans).

  • ConnieBrooks

    B is exactly right on the FICO score ratio. People with credit scores over 750 usually charge no more than 7% of their available credit.

    Available credit vs. used credit is 30% of your credit score.

  • b

    There are some hidden advantages to increased credit lines on credit cards.

    1. Your FICO score is partly based on your percentage of used credit on revolving credit accounts. 0-9% is the value that will keep your score the highest. Therefore if you turned down a $13,000 limit in favor of $4000 and have only $361 dollars in credit card debt you have a lower credit score because your are above 9%. When they pull your credit report they look at your current balance and not whether you pay your balance in full each month. Having a credit line will give you some breathing room to keep you below that 9% value. This is extremely important for me as I travel for work frequently and have to put hotel stays and flights on my card while I wait for reimbursement which comes before my credit card bill is due each cycle. I can keep my score high and still access the amount of credit needed to travel for work.

    2. If you have a rewards card, having a high credit line can really allow you to build up your rewards quickly. One example is when I plan to purchase my next car I plan to purchase it for cash. I will put the car on my credit card to earn the miles which will equal a full flight then pay off the value of the car the next day by check to the credit card company and not pay additional interest. In effect I will have
    earned a free flight by utilizing that credit for a total of one day at no cost to myself.

    The key is using your credit intelligently and know the limits of what you can afford. If you do not have the will power to control your spending turning down your increases is a smart thing to do, however; if you are responsible you should take your increases and think about how to maximize your financial situation using that value. Having a larger line of credit is a tool you can use to your advantage.

  • Greg

    There are several issues with this article.

    First of all, Chase is offering you a higher credit limit. That doesn’t mean you have to use it. If you cannot control yourself to not max out your credit line, that is not their fault. You obviously have an issue with spending.

    Second, if you don’t want the extra credit line, you can simply call them and ask to have it reduced and ask for them to no longer offer automatic credit line increases.

    Third, all banks do this. This is a typical practice of banks. If they see you are paying your bills on time, they extend you more credit.

    In conclusion, if you can’t control your spending, don’t blame it on a bank giving you a credit line increase. Blame it on your own faults

  • A

    Listen to Steve. These automatic credit increases are great for your FICO score. Your FICO score takes a dive when you have a balance on your card that is greater than 50% of your credit limit. So, let the increases come in and just be disciplined enough to not use it. When the day comes that you need to buy a house or car, you’ll be happy for it.

  • Steve

    Automatic credit increases are great. First, there is a soft pull on your credit report, which does not affect your score.

    Second, an increased limit means that your credit score will increase given that you have equal utilization. If you do not have the self control to spend within your means, there is no way you should have a credit card in the first place.

    Automatic credit increases are actually a smart way to build your credit score and reduce interest rates on large mortgage loans.

  • Ryan

    Baz, it is a good thing for that reason. The problem is that a lot of people don’t quite have the willpower needed to have a large credit line and not use it. My guess is people like you and me do, and love high limits that will never be touched. I commend those who know having a limit isn’t for them though.

  • Baz L

    OK, I don’t get it. Why is a higher limit a bad thing? From all what I’ve read, it’s going to increase your credit score because your balance would then be a lower percentage of your “available credit”.

    Now if we’re talking about decreasing the limit to curb your own temptation for using it, that I understand.

  • Chairman Steve

    Wow … that’s just irresponsible.

    Do they really think it could possibly be healthy for someone to run up over $10K on a credit card?

    My heart goes out to people when I hear they have $10K of cc debt … these companies are practically begging people to do it.

    I guess if you made six figures several times over, then having that much on a card wouldn’t cost you a fortune.

  • Tim

    Citibank just increased my credit limit too. i think chase and citi have the same marketers, because the credit limit increase announce sounded exactly the same.

  • Moneymonk

    Chase should come straight out with it. “We want to keep you in debt, therefore we are increasing your credit line”

    They may not be making money off of you ( interest, fees) therefore, they increased your limit. Hoping you will lose discipline

  • Interrobanger

    Hilarious, to those of us who follow this stuff. Sad, because many people probably DO think it’s an opportunity.

    I work with a merchant coalition on credit card fees and practices (especially on the interchange fee issue) and more and more I think the banks will have to clean up their act or lose out to Metafos or Gratis or even the micropayment strategy Bill Gates mentioned at Davos.

  • Ben

    I’m not looking forward to waiting on hold and traversing the phone menus but I’ll probably call and ask them to stop auto-increasing my limit, thanks for the suggestions!

  • Tim

    you can refuse the credit increase. you can request a credit decrease. you can call them to stop automatic increases without your prior consent, too.

  • mapgirl

    So are you going to call them and ask to have the limit reduced? I used to do that in college so I wouldn’t get deeper into debt. It helped a little.

  • Wooly Woman

    Yup, as a student I practically had to BEG my bank to quit automatically increase my credit card limit. It was just way too convenient!

  • MoneyNing

    I wonder if there is a way to get them to not increase your credit limit without asking them to decrease it.

    Maybe a credit rating expert can tell us whether or not seeing a decrease in credit limit for a credit card is a good, bad, or indifferent item in terms of FICO scores.

  • broknowrchlatr

    I’ve always found this obnoxious. But, I’ve found a way to beat it.

    When you apply for a new card, they tend to give you a limit of as high as they feel comfortabel giving you. When this happens, I immediately call them to decrease it to about 2 times the maximume ammoutn I ever imagine putting on it. That way, they mark on your acocunt tha tyou don’t want it increased.

    I got the chase freedom card and thy gave me a credit limit of $13,000 also. I promptly had it changed to $4,000

  • KMC

    That’s classic. I love it.

    “all those purchases you’ve been waiting to make” because YOU CAN’T AFFORD THEM.

    Enjoy that prestige this weekend.

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