The UK government recently complained about credit card companies who send out blank cheques to customers which can be used to pay certain bills without those cheques being requested first. Using those cheques could get those customers into bad debt, and it seemed to be the new rule that the customer had to ask for them, they couldn't just be sent out.
At the same time, the other highlighted practice which received bad press was for credit card companies to increase credit limits without being asked. And it's this practice which seems to be continuing.
My daughter recently received her credit card bill. With it was a letter explaining her limit had been increased by 1,500. She hadn't asked for the increase. She always pays her bill, on time, and in full, so she never incurs charges.
Over the past month or so she has spent more on her card than usual. Even so, the amount she reached is only around half of her limit. So, why have the company increased her available limit? Yes, it might look like they are being generous in doing that, but to me (and her), it is wrong. Companies don't do anything without reason. They are in business to make a profit.
Fortunately my daughter is a responsible borrower. Once she has paid this latest bill off in full not only will she phone them to say she doesn't want the increase, she will also ask them to reduce the amount downwards even lower. The fact they say that if a customer doesn't want the new increased available limit they can call them to remove the increase doesn't make it right. If they want to offer an increase, they should write to their customers to tell them it is available if they want it, and not simply add it without asking first.
Of course some will argue that no one is forced to spend up to the new limit, and that is of course true. But, some people will be tempted, and for those who do usually pay interest on outstanding balances they will end up paying even more. Those who pay off their balances each month may go beyond what they can pay and start to pay interest charges. Both of those scenarios are, I'm sure, exactly what the credit card companies want.
More on finance as Geoff writes about the dangers of credit cards and how sometimes credit cards can be useful when beginning taking on credit
