This morning was interesting. I woke up and checked my emails and saw that CC2 was increasing my credit limit from £6,800 to £11,800 from November. That is a £5,000 increase!
This made me think, I started to aggressively pay off my debt in February 2014. Since then all three of my credit cards have increased my limits. CC1 limit is now £12,000 and CC3 limit is now £4,200, come November (based on today's debt), I will have £17,767.99 of available credit. This is potentially a problem for a spendthrift like myself. That is a lot of money to spend......
I've learnt my lesson - I promise.
Now I know credit card companies will often increase limits on a yearly basis, however, CC3 had not increased my limit in 3 years. I suspect it was because I did not use that card during those 3 years. However, within weeks of me transferring a balance to that card, my limit increased. Surely the credit card provider should be thinking that if I have transferred a balance that I may be in financial difficulty and the last thing I need is access to more credit? Or is the prospect of me spending that money and paying interest just too much of an incentive to increase my limit?
Credit card balances seem to be a double edged sword. My understanding is that because I have had each of my credit cards for a long time (two for over 10 years), and have always made my minimum repayments (even, if at times, late) I am rewarded for this by an increase of my credit limit. The high balances I have in turn now result in me having a good credit record (apparently if I have decent limits, I must be 'good for it'). I find this rather bizarre. Now I know I am the one who spent the money and only I am responsible for my spending, but, my credit limits have continually been increased despite the fact that I have consistently had substantial balances.
This has encouraged my spending as the money was there available to me.
To put this into perspective CC1 initial limit in 2001 was £500, it is now £12,000. My highest balance on this card was £9,775.08 in December 2013 with a limit of £11,000. Yet my limit has still been increased.
I do have a bit of a bug bear with CC1. Since I started paying off my debt (I have concentrated on this card as it had the highest balance and had the highest interest) my credit limit has increased and I am continually being bombarded with letters, emails and text messages about transferring balances to it and transferring money to my bank account. I had never been offered these 'opportunities' until I started paying off my debt.
As it transpires, the increase to CC2 is somewhat useful to me. I need to transfer the balance of CC1 to keep the 0% interest and I was not especially keen on opening a new card and will now be able to transfer it to CC2. When CC3's 0% interest period expires in February I can then transfer it to CC1 or CC2. But long term, I only want one card so two of these will go eventually.
Has your credit limit increased once you started paying off debt? Has the increases encouraged your spending? What do you think?
* Photo courtesy of www.freedigitalphotos.net
This post is part of Financially Savvy Saturdays. Check it out!!