Thank you to all the taxpayers who are footing the bill for this. As Citibank continues to receive money from the government of the United States, funded by investors in Treasury bills and citizens of the future who will be paying more to the government to support the interest payments on that debt, Citibank continues to reward me. Rather than making new loans to businesses or individuals in needs, Citi simply raises credit card limits.
The concept is somewhat sound; raise credit limits and people will spend more, helping Citi with interest fees and helping the economy through more consumer activity. But if they’re raising the limit for people like me, there is no effect other than using bailout money to prop up their balance sheet.
I have never spent anywhere close to my credit limit in any one month. Yet, they targeted me as a candidate for an increase. I won’t decline the increase; a higher limit results in a lower utilization ratio, which will most likely lead to a higher credit score.
Here is their personal announcement to me:
YOUR ACCOUNT: CREDIT LINE INCREASE
Congratulations on Your Recent Credit Line Increase.
Dear (Flexo),
Because you are one of our loyal customers, we wanted to give your Citi® Card even more value. So reward yourself with the spending power and flexibility that comes with a higher line of credit.
You’ve earned it. Now enjoy it.
Use your new line of credit to transfer balances: You may qualify for a great rate on a balance transfer. To see what offers may be available to you, visit balancetransfer.citicards.com.
Wow, I feel so special. I earned it!
Clearly, Citi is hoping I will transfer a balance from another card, taking advantage of a low APR and balance transfer fee. Even if I had a balance to transfer, I would pass. This credit limit increase would have been better spent by Citigroup elsewhere.
Updated December 20, 2015 and originally published March 6, 2009.
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What a nice present! It is like they told you, “We like you so much that we want you to get more in debt and pay us more money.” You can tell that they really care about their customers. :)
What a joke!
-Nate
Hmmm…my letter was the exact opposite. Something like: You pay off your card every month and don’t pay us any interest so we are going to cancel your card and you can’t do anything about it.
RW, you have a gripe with the credit score system, but none with your credit card company: they’re in it to make money, and if you aren’t generating enough revenues, then they don’t OWE it to you to continue doing business with you. It’s an inconvenience to you to have to come up with a plan B– but it’s also a compliment :)
(To be fair, I realize you didn’t say or imply that they “owe” this service to you. Just adding to the conversation here.)
My guess is that there will for the near future be enough no-annual-fee/ plus rewards options for people like us– because there’s always the “hope” (theirs, not ours) that we’ll overshoot our spending and go into debt– but it’s not inconceivable that the “long-term relationship with people who don’t get into debt” type of credit card will eventually disappear. This is supply-and-demand like everything else. There will, though, almost certainly always be FEE-based cards for people who use them purely for convenience rather than for borrowing. And that’s fair enough. To the question “Why should *I* pay a fee??” the answer is another question: “Why should *WE* give you a free service?”
But in the meantime, there are other no-annual-fee options: some other company will think the combination of 1) being able to increase market share, 2) getting those few cents per transaction from vendors every time you use the card, and 3) the “hope” that you’ll eventually go into debt– and when you do will be able to pay it, makes you an attractive customer.
Flexo,
The issue of the lower utilization ratio SHOULD help your credit rating – until you go to actually USE that credit rating. Then having the higher limit is a knock against you. Before you actually get a loan, you should ask to lower the limit, so the bank has fewer reasons to push back.
Wow! You earned and you deserve it…now go out there and spend it! Hahaha – good for you!
At least you didn’t get the letter so many other people are getting – instead of credit limits, many are getting their interest rates raised. Capital One just bumped up the interest on the card I have with them to nearly *26%.* In response I just paid off the entire balance, and will probably close my account next month.
I have had my credit limits on various cards raised spontaneously and periodically in the past. I am not sure what formula they used to do it but I would not assume the action is necessarily linked to any bail out funds.
A friend received a letter from her credit card company that they had dropped her limit from $5000.00 to $3340.00. She has never maxed out her card, but had charged as much as $3000.00 on it. I had not yet heard of this practice. I guess they are covering their behinds for a lesser loss should she stop paying her bill.