1 in 3 Australians regret increasing their credit limit
57% of cardholders who increased their credit limit were prompted by their bank.
More than one in three Australians have extended their credit card limit in the last five years and regretted it, according to new research from finder.
More than half of Aussies (57%) who increased their credit limit during this time did so following an invitation from their bank. Of those who were solicited by their bank, more than one in three regret lifting their credit card limit. The remaining 43% of credit card holders applied for the credit limit increase without being prompted.
According to this research, 1.3 million credit card holders are struggling to manage their debt as a result of increasing their credit limit. On average, Australian credit card holders have a limit of $9,458 per credit card, and 34.4% of that is being utilised – a figure which has slowly been decreasing over the past two decades. However, this research from finder suggests that many Aussies have had trouble repaying their debt as a result of a credit limit increase.
ASIC has recognised and addressed this issue by banning credit card limit increase invitations from 1 July 2018. Following amendments to the National Consumer Credit Protection Act 2009, banks must not invite customers to increase their limits in any form of communication including email, phone, in person or letter. Previously, banks could contact cardholders as long as they had consented to receive credit limit invitations, but this is no longer the case.
This is just one measure being implemented to protect Aussies from predatory lending and unmanageable debt. From 1 January 2019, banks must assess a customer’s ability to repay the loan amount within a three-year time frame before approving a credit limit increase. As well as factors like your income, the three-year period must consider card fees and the highest interest rate, which is usually the cash advance rate. It also has to consider the potential costs you’ll face from other cards or loans.
Although these regulations are in place to protect cardholders, it's still important that you do your research to determine whether you really need a credit limit increase before you ask for one. A large credit limit could tempt you to overspend, which is how many Australians have fallen into credit card debt. As always, consider your eligibility, income and expenses before requesting a higher credit limit.
These are just some of the new controls rolling out under the new banking code of practice over the next year. From stricter affordability assessments to easier card cancellations, you can see our coverage of how the new code of practice will impact credit cards for more information.
Compare Credit Cards
- Swiping away inflation: 3 million Aussies reach for credit as pressure climbs
- Australians turn to credit cards as cost of living crisis continues
- How using a business card makes day-to-day finance admin easier
- Why I paid $10 more to earn credit card points on a Qantas flight
- 4 ways you can leverage a business card for company credit in 2024