Pro's & Con's of Updating Annual Income for Credit Card Credit Line Increase

Question

My bank has been hounding me to increase my credit line by updating my annual income. They must have some good flags to alert to such things since our spending has bumped a bit on the credit card, partly due to a salary bump, but partly do to trying to get more reward points. However we're always below 50% of the credit line for something like 11 months of the year at the least.

What are the pro's and con's of actually submitting this information to them? This question talks about marketing and demographic issues. What do credit card companies do with that information? And what's this no credit inquiry about? They basically make an internal decision without consulting any credit bureaus?

Answer 1

In my view one should have a limit on the card that one can easily forgo / pay-off in worst case without any material impact to lifestyle.

What are the pro's and con's of actually submitting this information to them?

Pro's:

• Better Credit Limit, can be good for emergencies
• If you spend stays same, lower credit utilization, slight boost in credit score
• This is without hard pull so will not ding the credit score in short run
• Certain services are for higher income customer, may get upgraded to better card

Con's:

• Higher Risk. [Depending on Country] Although most card companies provide Fraud protection, there are quite a few conditions attached. If Fraud amount are large, there are investigations to establish there was no lax on your part.
• If you get robbed at gun point [someone forces you to swipe card]; it would not be fraud and card company will not reimburse you.
• Unwanted Promotional mailer. Higher income means they can chase you for that expensive item with attractive schemes that sound good.
• More temptation to splurge. If one is religious about spending this doesn't matter

This question talks about marketing and demographic issues. What do credit card companies do with that information?

Various promotional mailers and schemes that can be more targeted. An ABC with X amount of income and Y age ... OK Young and Wealth, offer gadgets at attractive schemes ... Into 30's offer some lavish Vacation offer ... etc. Slightly into 40's ... Medical Insurance schemes, or something else for that segments ... maybe home improvement stuff.

what's this no credit inquiry about? They basically make an internal decision without consulting any credit bureaus?

No Bank is mandated to do an credit inquiry. Banks do to protect themselves. So in this case Bank believes you are a good credit user and would like to offer more if income has gone up.

For Bank the advantage is:

• You continue to stay with them [don't look for new card]. More often people apply for new card with new details and get better credit limits.
• They understand demographics better
• Can do targeted mailer to this segment.

Answer 2

What are the pro's and con's of actually submitting this information to them? Pros: You have a higher credit limit. Cons: They know a little more about you.

What do credit card companies do with that information? They use it to determine what offers to send you. The higher your income, the more offers, especially ones with annual fees.

And what's this no credit inquiry about? They basically make an internal decision without consulting any credit bureaus? Yes. Credit card companies have internal algorithms that use a combination of your income, payment history with them, housing payment, and such to determine if you are a low-risk candidate for credit limit increases. They do not need to do a hard inquiry because you are already a customer and have history with them specifically.

To the last point, because requesting higher credit limits do not result in a hard credit inquiry, I set myself a reminder to request one every 6 months (that is usually the timeline you have to wait in between each request. I have always gotten my limit increases approved. I do this because I know that my credit utilization rate needs to be low, therefore the higher my credit limit, the lower my utilization rate. It is all about discipline. So if you can really control your spending and still get increases, it really helps boost your credit score.