I recently received a credit card limit increase on one of my credit
cards of $2,500 without requesting that increase. The card had a
limit of $3,700 and a current balance of $2,100. I would like to
decline this increase. Will it hurt my credit to do so? Will they
demand payment on this account immediately if I decline? Thanks
for any help.
-- Phil Partake
You can decline the increase in the credit line. Whether
declining the increase is the right course of action depends on
you and your credit goals.
One reason to accept the increase is that it reduces
the ratio of outstanding balances to credit lines available. Being
maxed out on your credit cards gives the impression that you can't
handle credit. Although you only had used 57 percent of your available
credit line on this card, having a little extra breathing room shows
both self discipline and the ability to manage credit. The limit
increase could help improve your credit score.
There's a downside. If you know yourself well enough
to know that the additional credit line will act as a siren's song
and cause you to run up your balances, then accepting the increase
is absolutely the wrong thing to do.
Credit card companies like their customers to carry
a balance. Having a cardholder pay 13.99 percent (or more) on an
outstanding balance is how they make their profits. Larger balances
mean more profits -- at least as long as you're staying current
with your monthly payments. Late fees and over-the-limit fees boost
profitability for a period of time when you can't stay current,
along with an excuse to increase the interest rate on your card.
The credit card company has no reason to close
your account and demand payment if you decline the increase in the
card's credit line. They've just extended more credit to you, showing
that they value you as a customer. You not accepting the increase
doesn't mean that the company is no longer interested in your business.