Have you been caught by surprise by a friendly email or letter from your credit card issuer informing you that they’ve raised your credit limit? If you didn’t request a credit limit increase, this can likely leave you wondering: “Why did my credit limit increase?”

Let’s investigate what it means when you receive an increase, why automatic credit card increases occur, and what the benefits are.

What does it mean when your credit card limit increases?

A credit card limit increase simply refers to having an existing credit card limit expanded. This means that you can charge more on your credit card than you could with your previous limit.

If you pay off your bill in full each month or every time you make a purchase, you may not really feel the impact of a credit limit increase, but you will have more borrowing power.

Why did my credit limit increase?

Automatic credit limit increases are par for the course and can actually be a sign of trust from your credit card issuer. Here are a few of the most common reasons credit card issuers increase your limit without you putting in a request.

You’re a responsible credit user

If you always pay your credit card bill on time, your credit card issuer will trust you to have access to more credit. It’s not unusual for them to give you an automatic bump after you’ve demonstrated good credit habits over an extended period of time.

Your credit card issuer puts you on a path to an increase

Some credit card issuers have a predetermined path for increasing credit limits that is quite easy to follow.

To make things simple, they may determine a certain number of on-time payments you need to make for your limit to increase. You may not realize you’re on this path, so a credit limit increase can catch you off guard even if it’s planned.

Other lenders may review your eligibility for an increase after a set amount of time. For example, the Capital One Platinum MasterCard reviews your credit limit after as little as six months of having the card.

You report an increase in income

You’ll share your income when you apply for a credit card to help the credit card issuer determine how much to lend you. When your income increases, you can alert your credit card issuer to this raise in pay. If your income goes up, there’s a good chance your credit limit will go up as well.

It’s common for credit card issuers to remind their customers to update their income. If you don’t want a credit limit increase, avoid updating your income information.

Your credit card issuer wants to retain you

There are plenty of credit card options on the market and credit card issuers want to retain as many good cardholders as they can. An automatic credit limit increase may be their way of offering you a perk they hope will incentivize you to remain a customer.

The credit card issuer wants you to carry a balance

Credit card companies make money when you carry a balance that incurs fees and interest. With a limit increase, they may be hoping you won’t pay your bill in full every month.

If they have reason to believe that a higher limit will lead to you carrying a balance temporarily, that may encourage them to give you an increase.

Is an automatic credit limit increase a bad thing?

You may be concerned about a higher credit limit if you have memories of your credit score taking a hit after applying for the card, but automatic credit limit increases don’t impact your credit score negatively.

While requesting an increase can temporarily hurt your score — because of the hard inquiry the issuer may need to run — an automatic increase will not. Therefore, this could be an easy way to expand your access to credit and lower your credit utilization without harming your credit.

The only way an automatic credit limit increase can hurt you is if you find yourself tempted to spend more than you can afford. This would lead to you carrying a balance and incurring interest and fees.

The benefits of an automatic credit limit increase

An automatic credit limit increase can feel invasive, but there are a lot of benefits associated with getting one. These are a few of them.

Higher credit score

Your credit utilization rate, or credit usage, is how much credit you’ve used compared to how much credit you have available to you. Keeping that rate low helps boost your credit score.

The higher your credit limit is, the easier it is to lower your credit utilization rate — as long as you don’t start spending more and carrying a balance.

An automatic limit increase can help your credit utilization rate drop instantly. This is an important benefit since your credit utilization rate accounts for 30% of your FICO credit score (FICO refers to credit usage as “amounts owed”).

Convenient access to more credit

Improving your credit utilization rate helps raise your credit score, which in turn makes it easier to access credit in the future. The credit score benefits you’ll enjoy today can lead to better borrowing rates and terms down the road.

Easier to earn rewards

If you only use your credit card to make purchases you can afford to pay off right away, you’re reaping the rewards of having a credit card and not experiencing any of the downsides.

Having a larger credit limit makes it so you can make even more purchases using your credit card, which gives you the chance to earn more cardholder rewards. Credit card rewards can translate to cash back, gift cards, and travel points.

Just make sure you don’t forget to pay your bill on time!

To help you regain the perks of having a credit card, check out Tally†. The Tally app is making it easier and faster for Americans to pay down credit card debt by helping them manage payments and offering a Tally line of credit for those who qualify.

†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. Based on your credit history, the APR (which is the same as your interest rate) will be between 7.90% – 29.99% per year. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 – $300.

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