Much Can Go Wrong in Opening a Credit Card for the Wrong Reasons

What makes a credit card or a charge card popular? Rewards, minimal fees and low interest rates sure have something to do with it. Good marketing and a reputation for excellent customer service can play an important role as well. But what about a myth or misinterpretation? Could the promise of a feature not truly offered drive sales and create prominence for an otherwise unspectacular product? It seems unlikely, yet it is indeed the case for credit cards with the No Preset Spending Limit (NPSL) feature.

NPSL cards—like World MasterCard credit cards, Visa Signature credit cards and charge cards from both American Express and Chase—have become some of the most popular credit cards for people with excellent credit because many such consumers mistakenly believe them to provide unrestricted spending capabilities. This myth of limitless spending most likely stems from a combination of the uniform industry policy not to release NPSL card limits and a simple misinterpretation of “No Preset Spending Limit.”

While many consumers effectively ignore the “P” in NPSL, and believe cards with this feature to have “No Spending Limits,” NPSL actually means that a card’s limit is not a static amount, laid out in an original offer. Rather, it is a fluid spending cap that changes from month to month and is based on numerous factors such as spending patterns, payment history and economic trends. The confusion over the meaning of NPSL is only exacerbated by the fact that issuers do not notify their customers about their limits. This not only entrenches the no-limit myth, it also decreases NPSL card limit usability. Since you don’t know how much you can spend at any time with an NPSL card, it’s difficult to effectively budget or plan significant purchases with any certainty.

Additionally, being unaware of your card’s credit limit makes it quite difficult to maintain a low balance-to-credit-limit ratio (i.e. credit utilization), which is extremely important to achieving the best credit score possible as it signals responsibility. According to an NPSL Card Study conducted by CardHub.com, the way issuers report to the major credit bureaus can lead to credit utilization problems as well. The study found that NPSL card issuers report arbitrary credit limits—if anything at all—to the credit bureaus rather than their cards’ true limits. These substitutes can make your credit utilization seem higher than it truly is and can damage your credit standing since credit scoring agencies prominently include utilization in their calculations.

Such effects are largely unpredictable, given that Card Hub’s study also discovered that issuer reporting practices exhibit no uniformity. Similarly, some of the biggest providers of NPSL cards— HSBC, Chase, and U.S. Bank—were found to lack transparency in their reporting practices.

In light of these findings and the risk associated with NPSL card use, consumers should avoid No Preset Spending Limit cards. They should instead open rewards credit cards that meet their lifestyle needs and garner true benefit rather than confusion and uncertainty.

This guest blog is from CardHub.com, a website that helps consumers find the best credit card, charge card, prepaid card, or gift card.

61 Responses to Much Can Go Wrong in Opening a Credit Card for the Wrong Reasons
  1. Health and Fitness
    April 20, 2018 | 1:47 am

    I have been browsing online more than 3 hours nowadays, but I never discovered any interesting article like yours. It¡¦s lovely worth sufficient for me. In my opinion, if all webmasters and bloggers made good content as you probably did, the web can be much more helpful than ever before.

  2. Health and Fitness
    April 20, 2018 | 2:10 am

    Hello. excellent job. I did not imagine this. This is a remarkable story. Thanks!

  3. Health and Fitness
    April 20, 2018 | 2:13 am

    Thanks for the sensible critique. Me & my neighbor were just preparing to do a little research about this. We got a grab a book from our area library but I think I learned more from this post. I’m very glad to see such wonderful information being shared freely out there.

  4. Health and Fitness
    April 20, 2018 | 6:29 am

    hello!,I like your writing so a lot! percentage we keep up a correspondence more approximately your post on AOL? I need an expert in this area to resolve my problem. Maybe that is you! Looking ahead to see you.

  5. News
    April 20, 2018 | 11:49 am

    Pretty nice post. I just stumbled upon your blog and wished to say that I have really enjoyed surfing around your blog posts. After all I’ll be subscribing to your feed and I hope you write again very soon!

  6. Health and Fitness
    April 20, 2018 | 1:20 pm

    Very interesting information!Perfect just what I was looking for! “Peace, commerce and honest friendship with all nations entangling alliances with none.” by Thomas Jefferson.

  7. Health and Fitness
    April 20, 2018 | 3:07 pm

    Wow, marvelous blog layout! How long have you been blogging for? you made blogging look easy. The overall look of your site is fantastic, let alone the content!

  8. Health and Fitness
    April 20, 2018 | 4:18 pm

    My brother suggested I might like this blog. He was entirely right. This post actually made my day. You cann’t imagine simply how much time I had spent for this information! Thanks!

  9. Health and Fitness
    April 20, 2018 | 5:45 pm

    Hello there, just became aware of your blog through Google, and found that it’s truly informative. I am gonna watch out for brussels. I will be grateful if you continue this in future. Many people will be benefited from your writing. Cheers!

  10. News
    April 20, 2018 | 11:09 pm

    Enjoyed looking at this, very good stuff, appreciate it. “Golf isn’t a game, it’s a choice that one makes with one’s life.” by Charles Rosin.

  11. Health and Fitness
    April 21, 2018 | 1:34 am

    Its wonderful as your other content : D, appreciate it for posting . “Before borrowing money from a friend it’s best to decide which you need most.” by Joe Moore.

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Trackback URL http://mynextbuck.com/much-can-go-wrong-in-opening-a-credit-card-for-the-wrong-reasons/trackback/

Much Can Go Wrong in Opening a Credit Card for the Wrong Reasons

What makes a credit card or a charge card popular? Rewards, minimal fees and low interest rates sure have something to do with it. Good marketing and a reputation for excellent customer service can play an important role as well. But what about a myth or misinterpretation? Could the promise of a feature not truly offered drive sales and create prominence for an otherwise unspectacular product? It seems unlikely, yet it is indeed the case for credit cards with the No Preset Spending Limit (NPSL) feature.

NPSL cards—like World MasterCard credit cards, Visa Signature credit cards and charge cards from both American Express and Chase—have become some of the most popular credit cards for people with excellent credit because many such consumers mistakenly believe them to provide unrestricted spending capabilities. This myth of limitless spending most likely stems from a combination of the uniform industry policy not to release NPSL card limits and a simple misinterpretation of “No Preset Spending Limit.”

While many consumers effectively ignore the “P” in NPSL, and believe cards with this feature to have “No Spending Limits,” NPSL actually means that a card’s limit is not a static amount, laid out in an original offer. Rather, it is a fluid spending cap that changes from month to month and is based on numerous factors such as spending patterns, payment history and economic trends. The confusion over the meaning of NPSL is only exacerbated by the fact that issuers do not notify their customers about their limits. This not only entrenches the no-limit myth, it also decreases NPSL card limit usability. Since you don’t know how much you can spend at any time with an NPSL card, it’s difficult to effectively budget or plan significant purchases with any certainty.

Additionally, being unaware of your card’s credit limit makes it quite difficult to maintain a low balance-to-credit-limit ratio (i.e. credit utilization), which is extremely important to achieving the best credit score possible as it signals responsibility. According to an NPSL Card Study conducted by CardHub.com, the way issuers report to the major credit bureaus can lead to credit utilization problems as well. The study found that NPSL card issuers report arbitrary credit limits—if anything at all—to the credit bureaus rather than their cards’ true limits. These substitutes can make your credit utilization seem higher than it truly is and can damage your credit standing since credit scoring agencies prominently include utilization in their calculations.

Such effects are largely unpredictable, given that Card Hub’s study also discovered that issuer reporting practices exhibit no uniformity. Similarly, some of the biggest providers of NPSL cards— HSBC, Chase, and U.S. Bank—were found to lack transparency in their reporting practices.

In light of these findings and the risk associated with NPSL card use, consumers should avoid No Preset Spending Limit cards. They should instead open rewards credit cards that meet their lifestyle needs and garner true benefit rather than confusion and uncertainty.

This guest blog is from CardHub.com, a website that helps consumers find the best credit card, charge card, prepaid card, or gift card.

61 Responses to Much Can Go Wrong in Opening a Credit Card for the Wrong Reasons
  1. Health and Fitness
    April 20, 2018 | 1:47 am

    I have been browsing online more than 3 hours nowadays, but I never discovered any interesting article like yours. It¡¦s lovely worth sufficient for me. In my opinion, if all webmasters and bloggers made good content as you probably did, the web can be much more helpful than ever before.

  2. Health and Fitness
    April 20, 2018 | 2:10 am

    Hello. excellent job. I did not imagine this. This is a remarkable story. Thanks!

  3. Health and Fitness
    April 20, 2018 | 2:13 am

    Thanks for the sensible critique. Me & my neighbor were just preparing to do a little research about this. We got a grab a book from our area library but I think I learned more from this post. I’m very glad to see such wonderful information being shared freely out there.

  4. Health and Fitness
    April 20, 2018 | 6:29 am

    hello!,I like your writing so a lot! percentage we keep up a correspondence more approximately your post on AOL? I need an expert in this area to resolve my problem. Maybe that is you! Looking ahead to see you.

  5. News
    April 20, 2018 | 11:49 am

    Pretty nice post. I just stumbled upon your blog and wished to say that I have really enjoyed surfing around your blog posts. After all I’ll be subscribing to your feed and I hope you write again very soon!

  6. Health and Fitness
    April 20, 2018 | 1:20 pm

    Very interesting information!Perfect just what I was looking for! “Peace, commerce and honest friendship with all nations entangling alliances with none.” by Thomas Jefferson.

  7. Health and Fitness
    April 20, 2018 | 3:07 pm

    Wow, marvelous blog layout! How long have you been blogging for? you made blogging look easy. The overall look of your site is fantastic, let alone the content!

  8. Health and Fitness
    April 20, 2018 | 4:18 pm

    My brother suggested I might like this blog. He was entirely right. This post actually made my day. You cann’t imagine simply how much time I had spent for this information! Thanks!

  9. Health and Fitness
    April 20, 2018 | 5:45 pm

    Hello there, just became aware of your blog through Google, and found that it’s truly informative. I am gonna watch out for brussels. I will be grateful if you continue this in future. Many people will be benefited from your writing. Cheers!

  10. News
    April 20, 2018 | 11:09 pm

    Enjoyed looking at this, very good stuff, appreciate it. “Golf isn’t a game, it’s a choice that one makes with one’s life.” by Charles Rosin.

  11. Health and Fitness
    April 21, 2018 | 1:34 am

    Its wonderful as your other content : D, appreciate it for posting . “Before borrowing money from a friend it’s best to decide which you need most.” by Joe Moore.

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