Credit card limits

Stuff reports:

The total amount of credit card limits has topped $20 billion for the first time, and that does not surprise one retiree from West Auckland whose bank has offered to lift his limit by $19,500.

Gary Osborne, a retiree who owns two rental properties, didn’t ask for the increase offered in a letter by his bank, ANZ.

His limit hasn’t been automatically lifted, but a coupon was attached to the letter which he had only to send back for his limit to rise from $26,500 to $46,000. The letter said that as a valued customer, the new, higher limit had been “pre-approved”.

Osborne won’t be accepting the higher limit, calling it a “ridiculous” sum, and saying he has not need for it.

So he should say no.

Banks today won’t increase your credit card limit without your authorisation. This wasn’t always the case.

When I was at university and exceeded my credit card limit, the bank would decline further charges until it was paid off.

Once I was working, then whenever I exceeded my credit card limit the the bank would send me a letter saying you obviously need a higher limit and raised it.

They never asked me if I wanted a higher limit and over the years it went from $1,500 to $15,000.

A few years ago they agreed to stop this, and now just offer you a higher limit – which is fine.

Of course the banks want people to borrow more. But they also don’t want people unable to pay their debts off, so they do profile who to offer higher limits to. Again, you can always say no.

You can also do what I do, and highly recommend. Set up a direct debit to pay off your credit cards on the due date. That way you get up to 55 days free credit and never pay a cent in interest. Of course you need to have enough funds to be able to pay your bills off in full – but if you can’t – then might be better to get a personal loan than pay credit card interest rates.