Credit-Card Issuers Up Account Limits at Holidays

DON'T be flattered if your credit-card company upped your credit limit by several hundred dollars this holiday season. You're not alone.

Credit-card companies, for the past several Christmases, have been raising cardholders' credit limits to entice cardholders to spend more money and to encourage them to charge purchases on their card versus one of their competitors.

But this year, due to stiff competition among credit-card companies to rein in new customers, more issuers have opted to up cardholder's balances in hopes of retaining the cardholders.

Of the 250 largest credit-card issuers, which comprise 92 percent of the market, at least 60 percent have raised their customers' credit limits for the holidays, estimates Robert McKinley, president of RAM Research Corporation, a credit-card research firm in Frederick, Md. That compares to 30 percent to 40 percent in years past, he says.

The average cost for credit-card firms to acquire a new accounts about $100. ``So if you can keep a customer by raising his credit limit and save $100 in trying to get another customer, that is valuable,'' says Ruth Susswein, executive director of Bankcard Holders of America, a nonprofit consumer group based in Salem, Va.

Why is competition so fierce? Americans are weighted down with plastic, carrying on average up to 10 credit cards, she says.

As a result, consumer response to direct-mail credit-card solicitations dropped to a record low during the second quarter of this year, despite the fact that credit-card issuers unleashed the largest volume of solicitations ever in the first half of 1994, according to a recent report by Behavioral Analysis Inc., a market-research firm in Tarrytown, N.Y.

Yet, with renewed consumer confidence, consumers are charging purchases at a torrid pace. Visa reported that shoppers charged more than $11 billion on their Visa cards from the day after Thanksgiving to Dec. 10 - a 23 percent increase over last year.

MasterCard cited $7.8 billion in charges on its card from Nov. 25 to Dec. 9 - a 30 percent increase.

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