Nearly half of credit card holders have been offered a credit limit increase by their provider in the past year despite not asking for one.
According to new research by the Debt Advisory Centre, 47% of UK credit card holders say that in the last year their lender has offered them an unrequested increase in their credit limit.
Of these, 67% accepted the higher limit, the study by the debt advice company shows.
Perhaps surprisingly, young people were the most likely to be offered a higher credit limit.
Only 33% reject a credit limit increase
Nearly two-thirds of 18 to 24-year-olds who own a credit card have been offered an increased credit limit in the last 12 months.
That’s compared with 38% of those over 55.
Borrowers can refuse the increase. However, as the research shows, relatively few customers actually do so with only 33% actively rejecting extra credit.
Ian Williams, spokesman for the Debt Advisory Centre, said: "It’s worrying to see just how many credit card holders are being offered a higher credit limit without asking for one."
Catch 22 for borrowers
Williams added that the offer of a higher credit limit is something of a catch-22 for borrowers.
"If you never spend close to your limit you probably don’t need access to more money.
"However, if your borrowing is always close to the limit it may mean you’re struggling to manage your finances – which could be a sign you shouldn’t borrow more."
Nerys Lewis, head of credit cards at Confused.com, explained why a credit card provider may offer you an increase.
Why do card companies up your credit limit?
She said: "Card companies up your credit limit as they want you to spend more on your card, which in turn means they make more on transaction fees.
"Also, if you’re a good customer and need more credit, then they would rather you get it from them than apply elsewhere."
But is this a good or bad thing for borrowers? There are two ways to view it, Lewis said.
"Credit card providers constantly review your credit limit and upping it is one way of rewarding you for managing your credit well.
Why it can be a good thing
"This can be a good thing if you manage your finances well as you’ll have access to more credit.
"In addition, if you own a credit card that offers you rewards for your spending, such as cashback or air miles, you may be able to increase your rewards if you regularly spend more."
This is fine as long as can pay off your bill in full every month.
If you can’t, you may incur interest charges which can wipe out the benefits of rewards such as cashback.
Why it can be a bad thing
And for those already struggling to manage their finances, an increased credit limit may only further add to their problems.
Lewis said: "On the flip side, if card holders are trying to clear their debts then upping the credit limit may only make things worse.
"And if a credit card owner views extra credit as ‘free money’ then they’re probably going to have trouble managing their credit card no matter what."
Opt in not out
The main issue with card providers increasing your credit limit, says Lewis, is that it’s an opt out decision rather than opt in.
She added: "Your card company will send you a letter telling you that they’re going to increase your credit limit and you actively have to say you don’t want them to do it.
"A lot of people of course can’t be bothered to reply so through sheer apathy they get an extra limit.
"A much better way to do it would be to ask eligible people whether they want an increase – making it opt in – and only increase it if people actively say yes."