Financial Counseling Certification Program (FiCEP) Practice Exam

What should a cardholder consider regarding unsolicited credit limit increases?

1. They are beneficial

2. They should always be accepted

3. They can lead to increased spending

4. They have no relevance to credit scores

The correct answer is: They can lead to increased spending

A cardholder should recognize that unsolicited credit limit increases can lead to increased spending. When a credit card company raises a cardholder’s limit without their direct request, it may create a temptation to spend more than they would normally. This additional available credit can encourage impulsive purchases or a higher accumulation of debt, ultimately making it easier to overspend without the cardholder realizing the implications for their budget or financial security. Furthermore, higher credit limits can impact financial habits, potentially leading to a cycle of increased expenditures that might not be manageable in the long run. Understanding this behavior is crucial for maintaining responsible credit use. While such increases might initially appear beneficial, it is essential for a cardholder to be mindful of their spending habits in relation to these unsolicited increases.