High-Interest Credit Cards and Affordability Checks: What Lenders Should Review Before Increasing Your Limit
When your credit card lender offers you a higher limit, it can look like a vote of confidence. It may even feel useful at the time. But if you are already relying on credit to cover essentials or to get through the month, a limit increase can make things much harder rather than easier.
That is why lenders are expected to do more than simply press a button and raise your limit. Under FCA rules, firms must carry out a creditworthiness assessment before granting significantly more credit, and that includes considering affordability.
In simple terms, they should think about whether the extra borrowing is sustainable for you, not just whether you have managed to keep the account open.
If you were given one or more increases on a high-interest card while only making minimum payments, carrying a large balance, or showing signs of financial pressure, it may be worth looking more closely at what checks were carried out.
At Claim First, the wider focus is on helping people challenge unfair financial situations and other claim types where warning signs may have been missed.
Why A Higher Credit Limit Can Cause More Harm
A bigger limit is not always a problem. Some people use it carefully and never run into difficulty. But where a card already has a high interest rate, more available credit can sometimes keep you trapped in debt for longer.
That is especially true if you are only making minimum payments. MoneyHelper explains that if you pay more in interest, fees and charges than you repay from the balance over an 18-month period, you may be classed as being in persistent debt. It also gives an example showing that a £2,000 balance on a typical card at 22% APR, with only minimum payments of 2.5%, could take around 14 years to clear.
So if your lender could already see that your card balance was moving very slowly, or barely reducing at all, increasing your limit may not have helped you. In some cases, it may simply have given you more expensive debt to carry.
What Lenders Should Look At Before Increasing Your Limit
There is no single checklist that applies in exactly the same way to every account. But the FCA is clear that lenders need enough information to make a reasonable assessment. That means looking properly at your situation before allowing significantly more borrowing.
Before increasing your limit, a lender should usually review points such as:
Your Repayment Pattern If you have been making only minimum payments for a long time, that can be a warning sign that the borrowing is not being cleared in a healthy way.
Your Existing Debt Levels A lender should consider what other borrowing you may already have, including other credit cards, loans, catalogues or overdrafts where that information is available to them.
Your Account Conduct Frequent use of most or all of your available limit, repeated balance transfers, missed payments, or persistent interest-heavy balances can all point to financial strain.
Your Ability To Repay Sustainably The key issue is not just whether you can make this month’s payment. It is whether you can repay over time without falling into financial difficulty or having to borrow more elsewhere.
Information From Credit Reference Agencies And Internal Data Lenders often have access to your credit file and their own account history. If those records show signs of pressure, that should form part of the decision.
Whether The Increase Is Significant Under FCA rules, firms must assess creditworthiness before granting significantly more credit. That includes significant credit limit increases on running-account credit such as credit cards.
Minimum Payments Do Not Prove The Borrowing Was Affordable
This is one of the biggest misunderstandings in credit card cases. Just because you kept making the minimum payment does not mean the card was affordable.
In reality, minimum payments are designed to keep the account ticking over, not necessarily to clear the debt quickly. MoneyHelper says the minimum repayment is often around 2.5% of what you owe, or a set cash amount, whichever is higher. It also explains that this usually covers the interest and only a small part of the balance.
That matters because a lender should not assume that “up to date” means “financially comfortable”. If your payments were technically on time but your balance barely moved, or you stayed heavily reliant on the card month after month, those are issues that should not be ignored.
Red Flags A Lender Should Have Taken Seriously
If any of the following applied to your account, they may have been signs that a higher limit needed much closer scrutiny:
You Were Only Making Minimum Payments This can suggest that you were struggling to reduce the balance in any meaningful way.
You Were Using Most Of Your Existing Limit Consistently high utilisation can indicate dependence on credit rather than flexible day-to-day use.
You Received Repeated Limit Increases Several increases over time can allow debt to build faster, especially where your financial position was not improving.
You Were Paying High Interest Month After Month If interest kept stacking up while the balance changed very little, that is the kind of pattern lenders should notice.
You Had Other Signs Of Financial Pressure Missed payments elsewhere, growing unsecured debt, or obvious strain in your credit profile may all have been relevant.
You Needed Credit For Everyday Living Costs If the card was effectively being used to cover regular essentials rather than occasional spending, that may point to a deeper affordability issue.
Persistent Debt Rules Matter Here Too
The FCA’s credit card rules were tightened to give more protection to customers stuck in long-term debt. The regulator said the changes were intended to help people in persistent debt and those at risk of financial difficulties.
It estimated the reforms would save consumers between £310 million and £1.3 billion a year in lower interest charges. The FCA also said its market study analysed 34 million credit card accounts over 5 years and found around 4 million accounts in persistent debt at the time.
The same FCA announcement also said customers in persistent debt for 12 months would not be offered credit limit increases under voluntary measures agreed by credit card firms.
That does not mean every limit increase automatically breaks the rules. But it does show how seriously the regulator views repeated, interest-heavy revolving debt.
When A Limit Increase Could Be Worth Challenging
You may want to look into things further if:
You were given more credit while already struggling
Your lender increased your limit more than once
You could only afford minimum payments
The extra credit left you paying more interest for longer
Your balance kept growing instead of coming down
That does not automatically mean you have a valid claim, and each case turns on its own facts. But if the lender had enough information to see that more borrowing was likely to make matters worse, it may be fair to question whether the checks were good enough.
FAQs
Do Lenders Have To Check Affordability Before Increasing A Credit Card Limit?
If the increase is significant, lenders must carry out a creditworthiness assessment under FCA rules. That is not limited to checking whether you have used the card before. It can include looking at whether the extra borrowing is likely to be affordable and sustainable for you over time.
Does Making Minimum Payments Mean My Credit Card Was Affordable?
No. Minimum payments can keep your account up to date without doing much to reduce the balance. That is why long periods of minimum-payment behaviour can be a warning sign rather than proof that everything was manageable.
What Is Persistent Debt On A Credit Card?
Persistent debt is when, over an 18-month period, you pay more in interest, charges and fees than you repay from the actual balance. When that happens, your card provider must contact you and offer help.
Can Repeated Credit Limit Increases Be Unfair?
They can be, depending on the circumstances. If your lender kept raising your limit while your account already showed clear signs of pressure, it may be reasonable to ask whether the decision was responsible and whether enough checks were carried out first.
Speak To Claim First
If your lender increased your limit on a high-interest credit card when you were already struggling, do not brush it aside. The pattern on your account may show that more borrowing should never have been offered in the first place.
Visit Claim First or get in touch to find out whether your situation may be worth reviewing.
