Monday, January 05, 2009

TD Visa limit increase

There was some news in my most recent statement from TD Visa. They have lowered the rate on the card. Also they have increased my credit limit by $1000 to $4500 now.

It's been around a year since they increased it to $3500. I never used the additional balance above $2500 they granted. I don't use the TD visa or any credit card very much. I mostly just use cash and sometimes debit card. There's something highly satisfying and powerful about paying cash.

Mostly with TD visa I just pay a bit more than the minimum each month. I've been using a win-hold strategy between the TD visa and MBNA mastercard. I've been pretty much minpay the visa while putting more payments onto the MBNA. That makes sense when the MBNA interest is over 20% and the TD interest is around 12%.

Still it's nice to get recognized for the ongoing progress with the debt situation. I don't really plan to use this newly available balance but it's there I guess for some unexpected thing.

I know some people are interested in getting a credit limit increase. Here are some tips for how to TD visa credit limit increase.

Don't call the bank, they'll call you. They have a big mainframe computer which runs a big batch job once a month to determine who gets credit limit increases. They'll know about you soon enough when they decide you're ready for a higher limit.

Be a customer. If your only product with the TD bank is the credit card then you're not really a first class customer. They don't really care much about you [except they care that you stay always current on the card] and will be not inclined to do anything for you. For myself I have a small savings account with TD and a personal loan. I've been with the bank in one way or another all my life. If you have some accounts, investments, a TD green card, etc. and set foot in a branch once in a while then they will look at you more holistically as a customer when determining to grant additional credit card limit.

An importanct concept to the bank is capacity. They want people who have the capacity to service higher debt or make higher payments. So you need to demonstrate capacity to the bank. These are some ways to help the banks computer recognize you have the capacity for an increased credit card limit.

  • greater than minimum payment. If you only make the mininum payment then you're telling the bank you are stretched to your limits financially. The bank will be risk averse and will not grant you new credit. You are barely able to service your existing loans, borderline delinquent. Even if you just take the minimum payment and round it up to the next multiple of $10 then you are showing the bank you have additional money to spare and you can service a higher limit
  • steadily decreasing balance. If your outstanding balance declines six months in a row this is an important thing the bank's computer will notice. It's OK to have a balance and make new purchases on the card. However your overall balance owed must decline each month. By doing that you are showing you have the capacity to service your balance and things are well in hand. Thus you are low risk for an increased limit.

    Conversely if your balance is rising month over month then that is a red flag to the bank. You are demonstrating you probably spend more than you make and are higher risk for eventual default. The bank will be much less likely to risk putting a higher credit limit at risk.

    Of course if you want to go south this winter and use credit card to pay for the trip [although you should either pay cash or stay home]; then pay it down smartly over the next 6 months then that's OK with the bank. A balance increase due to a big spike purchase is one thing. The bad type of balance increase is when the purchases are for gas, groceries, gifts, entertainment, etc. They know what you're buying and pay attention to why your balance may be increasing.
  • unused capacity. This is a bit of a paradox in that the bank tends to give credit card limit increases to those who don't seem to "need" it because their available unused balance is already pretty high. But that's the thing. By keeping unused balance you are demonstrating the capacity to properly manage that amount of available credit. You are a good candidate to be trusted to manage more available credit; even if the bank expects you likely won't use it.

    On the other hand if you are at or near your credit limit then you are demonstrating poor credit management skills. Although you would very likely spend the newly granted credit on your card, the bank has to be concerned if you have the capacity [either income stream or personal financial skills] to service an increased credit limit and actually repay it. A wise bank would be very cautious about letting these people extend themselves any further until they can demonstrate some capacity to service their existing debt load.

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