Nearly three-quarters of credit cardholders who requested a limit increase and were denied turned to installment plans as an alternative source of credit, revealing how rejection decisions push consumers toward competing financial products.
The findings come from “Credit Limits: Understanding Requests, Denials And The Consumer Experience,” a PYMNTS Intelligence and Elan Credit Card collaboration based on a survey of 2,199 cardholders. The report examines how credit limit decisions shape customer relationships and reveals significant gaps in how issuers communicate these decisions to cardholders.
Key Data Indicate:
- While 38% of cardholders received a credit limit increase in the past year, 67% of those who explicitly requested one were denied. Among cardholders who received increases, 56% were granted automatically without requesting.
- Subprime borrowers face particularly steep denial rates, with 94% of those who requested an increase being rejected. These borrowers were also more than three times as likely as super-prime cardholders to request a limit increase in the first place, at 32% versus 9.3%.
- After being denied a limit increase, 31% of cardholders reduced how often they used that card, 20% applied for a new card from a different issuer and 19% stopped using the denied card altogether.
The report highlights a critical disconnect between issuers and customers around transparency. Only 37% of cardholders say they understand how issuers decide whether to grant or deny credit limit increases.
The remaining 63% report understanding the process only somewhat or not well at all. This opacity carries real consequences. One-third of cardholders who have requested or received a credit limit adjustment in the past three years say the outcome felt unfair at least once.
Credit limits play a central role in financial planning for many consumers, particularly younger ones. Overall, 42% of cardholders say credit limits are very or extremely important to their financial planning.
That figure jumps to 55% for both Gen Z and millennial cardholders, compared to just 27% for baby boomers. Subprime borrowers also place greater emphasis on credit limits, with 56% calling them very or extremely important versus 36% of super-prime borrowers.
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The research found that younger consumers and those in lower income brackets were most likely to request limit increases and face denials. Gen Z cardholders requested increases at a 21% rate, while those in households earning under $50,000 requested at a 14% rate. Meanwhile, cardholders in all income brackets requested limit increases at nearly the same rate, yet those earning over $100,000 annually were much more likely to receive them at 43% compared to lower earners.
The data suggest that while most credit limit increase processes are straightforward, with 84% of requesters finding the experience easy, the lack of transparency around decisions damages issuer relationships and pushes consumers toward alternative credit sources.
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