Can my Credit Card Provider Increase my Credit Limit Without Notice?

Credit cards are one of the most used methods of payment. They are convenient, flexible, and accessible to most people. They provide many benefits, such as the ability to shop online, earn cash back and points, put holds on hotels and car rentals, build a credit history, and boost your purchasing power.

One of the notable characteristics of credit cards is that their credit limit typically increases over time, allowing you to spend more. Credit limits vary, but cardholders can expect their spending capacity to increase over time.

While most people would welcome an increase in their credit limit, there are instances where it may not be a good idea. Those with poor spending habits and huge debts may object to increases, seeking instead to get their financial affairs in good order. Other cardholders rarely utilize credit and are content with a modest limit on their account.

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Can a Credit Card Company Increase Your Credit Limit Without Your Consent?

Your credit card issuer must always ask for your permission before raising the credit limit on your card.

In January 2010, the Government of Canada instituted new regulations to enhance consumers’ awareness of credit limit increases initiated by financial institutions. The regulations state the following:

• The financial institution must obtain consent from the borrower each time they increase their credit limit. 
• If the borrower gives consent to a credit limit increase orally, the financial institution must submit confirmation of that consent to the borrower in writing, either in paper or electronic form. The confirmation must be provided to the borrower no later than the date of their next credit card statement.
• The borrower’s use of the credit card does not constitute consent to credit limit increases.

The above rules act as a safeguard to borrowers, offering them full transparency about changes made to their credit limits so that they can assess the implications for their finances. 

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Benefits of Increasing Your Credit Limit

An increase in your credit limit confers numerous benefits:

• Lower credit utilization ratio: An increase in your credit limit will lower your credit utilization ratio. This ratio is a key factor assessed by credit rating agencies like Equifax and Transunion to assign your credit score. A lower ratio increases your credit score, making it easier to get approved for mortgages, personal loans, auto loans, etc.
• Great for emergencies – The more sources of cash you have access to, the better. Situations may arise where you suddenly need a large infusion of cash, perhaps to pay for an unexpected expense. A higher credit limit provides you with access to extra money, should you need it, without relying on an emergency fund.
• Better than opening a new credit card account – Opening a new credit card account will effectively shorten the length of your credit history. One of the credit agencies’ criteria to determine your credit score is the average age of your credit accounts. In general, the longer your credit history, the better, as it shows you have experience managing your payments. Adding a new credit account will decrease your existing accounts’ average age, which isn’t ideal if your goal is to build a solid credit profile quickly.
• More Rewards/Points – An increase in your credit limit provides you with more spending power, which is advantageous if your credit card offers a rewards program. By moving more of your daily spending to your credit card, you can earn more points or receive more cash back.

Additional Reading

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Drawbacks of Increasing Your Credit Limit

While an increase in your credit limit comes with many advantages, you should also be aware of the pitfalls.

• More Debt: If you’re supplied with extra spending capacity, you may be tempted into purchasing more than you usually would, which can increase your debt load. If you’re already experiencing trouble paying off your existing debt on time, an increase in your credit limit can exacerbate the problem.
• Hard Inquiry – There are two types of credit checks lenders conduct on your credit report – a soft check and a hard check. A soft check doesn’t affect your credit score, while a hard check does, and results in impairment. Suppose your card issuer expresses that you may be eligible for a credit limit increase. In that case, it likely means that you’ll have to consent to a hard check. Before claiming your eligibility for the increase, you should inquire with your card issuer if they will need to conduct a hard check on your credit report. However, if you’ve received a notification that your credit limit was raised, it implies that a soft check was performed, which means there was no impact on your credit score.

Can a Credit Card Company Decrease Your Credit Card Limit Without Your Notice?

While your credit card issuer must always obtain your consent and provide you with notice before increasing your limit, they have no such obligation to do so should they decide to decrease your limit.

Final Thoughts

There are regulations in place governing financial institutions’ discretion in raising customers’ credit limits. You have the right to choose whether you wish to have your credit limit increased. Credit card issuers must obtain your consent each time they raise your limit and must provide you with written confirmation of the change. As a result, you can plan your budget with the knowledge that there are additional controls in place to curb those occasional moments of excessive spending.