No Preset Spending Limit or Reward Credit Cards: The Excellent Credit Debate

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What does No Preset Spending Limit (NPSL) mean to you?  Many consumers, normally with excellent credit, take this popular credit and charge card feature to mean “no limit.”  They think that NPSL products—such as the charge cards offered by Chase and American Express as well as Visa Signature credit cards and World MasterCard credit cards—provide limitless spending capabilities, and this false impression has led such cards to become some of the most popular credit cards for excellent credit on the market today.  To credit card companies, however, NPSL means something entirely different—a fact that has a myriad of negative implications for users.

If a credit card has No Preset Spending Limit it will be prominently listed as one of the card’s features on the issuer’s website, accompanied by a superscript.  Many of us might just ignore this little mark or skim right over it without bothering to check what it corresponds to.  This is unfortunate because by clicking on this symbol or locating its match at the bottom of the page, you would discover a clear explanation of what NPSL really means.  For example, the following was found on the page for the American Express Platinum charge card:

“No pre-set spending limit does not mean unlimited spending.  Purchasing power adjusts with your use of the Card, your payment history, credit record and financial resources known to us, and other factors.”

Still, as this is the most specific information an issuer will provide about your card’s limit, you’ll never know exactly how much you can spend with your NPSL card or whether your card will get approved for a significant purchase.  Credit card companies don’t release NPSL card limits because doing so would overtly shatter the illusion of unlimited spending, which they know spurs NPSL card popularity.

A Nov. 2010 NPSL Study by CardHub.com also found that NPSL card issuers keep the major credit bureaus in the dark in terms of their cards’ true limits as well.  According to the study, issuers report proxy credit limits or nothing at all for their NPSL cards.

Credit card companies regularly report information about the usage of their products, which credit scoring agencies (e.g. FICO) use to evaluate consumers.  This information is helpful when it accurately reflects one’s usage.  However, when substitute limits are employed, you could appear to have exhausted more available credit than is actually the case, which can be a sign of fiscal irresponsibility and can hurt your credit score.

Exactly how your credit will be affected is essentially indeterminable because it depends on factors such as the number of credit cards you have, your overall available credit and your credit history.  Similarly, Card Hub’s study determined that the proxies used by issuers aren’t consistent and that major companies like HSBC, Chase, and U.S. Bank aren’t even be open about what reporting methods they typically use.

Opening an NPSL card is, therefore, not recommended.  This is not the case simply because such cards actually have credit limits.  It’s because the secrecy around these limits and the additional hassle consumers must endure in trying to compensate for the way NPSL cards are reported to the credit bureaus is not met with any incremental benefit relative to some of the best rewards credit cards.  So shelve the NPSL, seek a reward, and remain excellent.

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1 Comment on "No Preset Spending Limit or Reward Credit Cards: The Excellent Credit Debate"

Bob Traylor
Interesting – when I called Citigroup about my Platinum and Premier No Present Spending Limit cards, the girl assured me that the cards didn’t affect my credit score at all because they were reported to the bureaus as “zero credit limit”. After the third time, I finally said, “This is the exact reason it is affecting my credit score”. She then pulled up my credit rating with Equifax and it was fine. She said, “You must have filed a complaint because only people that file complaints with Equifax and Citigroup get NPSL cards reported as $20,000. revolving credit limits as you have here”. I told her I had filed a complaint about a year ago with both, but had given up as they both responded saying their was “nothing they could do”. ie both Equifax and Citigroup check their reporting procedures and were satisfied. The bottom line: If you file… Read more »
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