What to do if the bank increases the credit card limit without authorization

Try to ask the bank to extend the limit of the credit card it can be a somewhat laborious task, between making the application, sending proof of income or documents that are requested and waiting for eventual approval.

The opposite, however, is quite fast: it’s not uncommon for banks extend the card limit without the customer being consulted or giving approval.

Having a looser limit is advantageous for those who want to split the value of some extraordinary purchase, such as an electronic or an appliance, or take a vacation trip, for example.

There are also many people who end up using the card to accumulate daily expenses and pay them all at once at the end of the month, as a way to organize themselves and also to accumulate points, miles or advantages that many offer.

But any carelessness in not paying the bill on time will result in the charging of the most expensive interest in the market – the average rates charged on the revolving credit card in the country today are around 330% per year, according to data from the Central Bank .

This means that, in a year, an amount that has not been paid or renegotiated will more than quadruple.

Late payments and without even the minimum invoice amount being covered are still subject to the collection of a fine and daily IOF tax.

As the cost of this debt is very expensive, experts recommend organization and parsimony both in the use of the credit card itself, and in the amount of the limit it will have – including for security reasons, since, with the escalation of scams and data theft, a higher limit can imply greater losses as well.

“More credit means greater consumption potential, but the risks are many. They range from the risk of indebtedness to the risk of losing or having the card cloned and someone taking advantage of this high limit to make purchases”, says economist Ione Amorim, coordinator of financial services at the Brazilian Institute for Consumer Protection (Idec).

If you don’t have the need for a higher limit, keep it within your consumption threshold. Credit limit is not an income supplement. Your limit is not what the bank gives you, it’s what your income allows.

Ione Amorim, economist at Idec

Bank is required to reduce

There is no rule today for the voluntary offer by the bank of a higher limit for their customers’ credit cards, which is why they continue to use this expedient.

Amorim affirms, however, that the bank is obliged to reduce the limit if the client so requests. Some institutions even allow this to be done directly by the user in the app or in internet banking.

In overdraft, for example, another of the most expensive and problematic credit options, the Central Bank forbade banks to increase the limit without consulting and without the consumer’s permission.

The ban came into effect in January 2020, along with a set of new rules that the BC created for the modality, aimed precisely at rationalizing its use and reducing interest rates. Average interest on the overdraft has dropped from 250% a year that month to 125% today.

Cost of debt on the card

In addition to falling in the highest interest rates in the market, the consumer who fails to pay the credit card bill on the due date will also have to bear a fine and daily IOF charge, until the amount is paid.

Both the fine and the IOF tax are avoided if the customer pays at least the minimum amount required, which is 15% of the total invoice. This also prevents him from being considered in default and getting his name dirty, for example.

The remaining amount that was not paid, however, remains subject to interest of more than 300% per year.

“If a person has a debt of R$1,000, and pays only the minimum of 15%, R$150, there will be a remaining balance of R$850,” says Amorim, from Idec. “With interest that is about 15% per month, in a month these R$ 850 will already be almost R$ 1,000 again, without the person having made any new purchases.”

Those who pay only the minimum amount also have the option of negotiating with the bank and paying the remaining balance in installments at slightly lower interest rates – although they are still very high rates.

The average interest rate for credit card installments is currently at 164% per year, according to the Central Bank. It’s already half the revolving fee, but it’s still higher than the overdraft fee.

One option to escape the high cost is to try a direct loan with the bank – it can be the same or another one –, at slightly lower interest rates, to pay off the bill and exchange the more expensive debt for a slightly cheaper one.

“But you have to be disciplined,” says Amorim. “It only makes sense to exchange the more expensive debt for a cheaper one if you are going to stop using your credit card, or else the person will only be accumulating more problems.”