Unsolicited credit card limit increases: why they're a bad idea and how to reject them

Sneaky credit card providers are using unsolicited credit limit increases to tempt us into more debt. Here’s why they're dangerous and how to reject the change.

Nearly one in five borrowers struggling with credit card debts have had their credit limit increased without requesting it, according to a new report from Citizens Advice.

The charity found people struggling with long term credit card debt were more likely to have their limit raised by their provider.

Almost one in five (18%) of struggling credit card users had their spending limit increased over the past year without asking for it, compared to 12% of all credit card holders.

Citizens Advice says that poor affordability checks mean these increases are threatening the stability of people’s financial positions and it's calling for the practice to be banned.

What’s the problem with automatic credit limit increases?

Credit card providers will paint an increase to your credit limit as ‘good news’, but if you’re not in control of your debt an increase can be unwelcome temptation to sink deeper into trouble.

A credit limit increase is also not a great idea if you want to apply for other credit products like a loan or a mortgage. Having a large credit card limit means other lenders may see you as a bigger risk.

Citizens Advice says it helped nearly 66,000 people with over 140,000 credit card debt problems last year.

It estimates the average British adult has £1,600 worth of credit card debt, but with irresponsible credit decisions from lenders, people are being encouraged to take on more debt than they can handle.

One case involved a pensioner who was repeatedly contacted by credit card firms offering credit cards, despite the fact she could only afford to make the minimum payments on her existing cards.

She used the cards to pay for her essential bills and ended up with a 21 in total with debts totalling a staggering £70,000.

In another case, the charity helped a man who despite having four credit cards with £15,000 owed and only making the minimum payments, he was notified by all four providers that they would be increasing his limit.

Call for change

Citizens Advice is calling for changes to help protect borrowers from falling into debt through unsolicited credit limit increases.

It wants providers to be banned from raising credit limits without getting a request.

The group also wants the Financial Conduct Authority (FCA) to provide better guidance to lenders on checking a borrower’s ability to repay before increasing limits.

Citizens Advice Chief Executive, Gillian Guy, said: “It’s clear that irresponsible behaviour by some lenders is making people’s debt situation worse - such as offering more credit when they already have thousands of pounds of unpaid debt.

“The regulator must ensure that lenders are taking into account people’s whole financial and personal situation before agreeing further credit.

“Banning firms from raising existing customers’ credit limits without seeking their express permission first would also help people take more control over their finances.

“Lenders must act responsibly and direct people struggling with debt towards free and independent advice and support - rather than more credit.”

The FCA is planning to make lenders help those that have been struggling with credit card debt for three years to arrange a plan to pay their outstanding balance more quickly. But Citizens Advice says lenders should be asked to intervene sooner – at the very latest after two years – to help people struggling with unaffordable debt.

Your rights on unsolicited credit limit increases

If your credit card provider offers a limit increase you have the right to reject it.

You should receive a letter outlining the ‘good news’ which details what to do if you don’t want your balance to change.

You have a 30-day cooling off period where you can tell your provider you don’t want your limit to go up. Typically, you will be able to call and inform your provider that you want to reject the increase. Sadly, not everyone offers the option to take action online.

Have a read of why we think all lenders must offer the option to decrease credit limits online.

If you do nothing your limit will automatically increase. But even if this happens you will be able to ask for a credit limit reduction at any time.

However, you won’t be able to request a limit reduction if you’ve started using the additional credit.

If you think your lender has acted irresponsibly to increase your credit limit, for example, if it increased your limit when you were already missing repayments or exceeding your credit limit, you can complain.

If your provider hasn’t resolved the issue within eight weeks you can take your complaint to the Financial Ombudsman Service.

What to do if you’re struggling with debt

If you have large credit card debt that you are struggling to pay off, you could benefit from using a 0% balance transfer credit card to get back in control of your finances.

These deals allow you to shift expensive credit card debts and freeze the interest for a set period allowing you to pay it down.

Take a look at our round of the best deals in: The best 0% balance transfer credit cards.

However, if you have a poor credit rating you might not be able to access the tops deals. If you’re in this situation you might want to check your credit report and look at ways to improve your credit rating.

You may also want to get some free advice on what your next steps should be. There are several organisations that can help. Take a look at our guide where to get free debt advice for more.

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