06/28/2024 | Press release | Distributed by Public on 06/28/2024 08:19
Over the past few years, the credit card landscape has seen its fair share of challenges. Pressures from the pandemic coupled with record-breaking inflation have materially impacted both the credit card lending landscape and consumer credit reports. It is during this period that demand for credit cards increased dramatically due to the growth and wider adoption of digital payments, as well as consumers' desire to maintain their credit card purchasing power for the same basket of goods.
With credit card issuers exercising restraint with conservative new originations (lower approvals and starting limits) and restrictive limit management on existing credit card customers (increased credit limit decrease and suppressed credit limit increase activities) in the same timeframe, this added more fuel to the demand fire.
The change in credit limits has not kept pace with the growth in balances
Source: FICO® Advisors Risk Benchmarking
The economy and consumer sentiments are getting better and will continue to improve, therefore it is wise for credit card issuers to have actionable plans in place today that are ready to engage the right customers and fulfill this demand in the short term. A good place to start for issuers would be a credit limit increase (CLI) program for existing credit card customers.
A well-executed credit limit increase program can bring forth benefits such as:
Managing a credit limit increase program requires a thoughtful and prudent approach that includes:
Region |
US |
Canada |
UK |
CLI Requirement |
Customer's affordability is accounted for in offer eligibility |
Customer must provide opt-in consent to accept offer |
Customer must be offered an affordable CLI, and be provided an opt-out option to decline offer |
To further expand on affordability, considering a customer's ability to repay debt in a CLI strategy is regarded as an industry best practice, and the lack of access to actual income data or a complete 360° affordability view should not be a hindrance in standing up a CLI program. It is commonplace to infer income and other related affordability measures such as debt-to-service ratio using a combination of information sourced from:
To learn more, review this FICO blog: "Revolving Credit Product Limit Change Management Best Practices" for further tips on how to drive a successful CLI campaign. If you are interested in hearing more from FICO on this or similar topics, reach out to your designated FICO Advisor or Account Manager today and subscribe to our Customer Credit Lifecycle Blog to be notified when new posts are published.