If you’re feeling like your debt is mysteriously increasing, don’t blame it on your spending habits just yet. It turns out your bank might be quietly digging you a deeper hole.
According to new research from King’s Business School and the Federal Reserve Board, roughly four in five credit limit increases in the U.S. are initiated by banks, not consumers. These automatic increases now add more than $40 billion in available credit every quarter.
To add to this outrageous discovery, the study found that most of that extra credit goes to borrowers who already carry revolving balances. After their limits are raised, those borrowers’ balances rise by about 30 percent on average, making algorithm-driven credit decisions a largely invisible force pushing household debt higher.
Who Is Being Targeted and How?
The study found a clear pattern that banks are more likely to raise limits for people who, get this, already owe money. “Revolving borrowers are highly profitable,” said Dr. Agnes Kovacs, lead author of the study. Yikes.
One-third of all unpaid credit card balances in the U.S. are the direct result of limit increases made after the card was opened. Among borrowers with lower credit scores, that number rises to 60 percent.
“Automated credit limit increases can expand access to credit and help households smooth consumption,” Kovacs said. “But our findings show that when algorithms target borrowers already in debt, the result is often higher borrowing and greater financial vulnerability.”
How Are Banks Doing This?
These aren’t random decisions made by the bank, but rather a product of predictive modeling. Banks are employing artificial intelligence to determine which customers will borrow more if their limit is raised.
“Banks are using increasingly sophisticated models to predict which customers will borrow more,” Kovacs said. “For many, that means an automatic increase they never asked for and may not fully understand. These decisions are shaping household debt across the country in ways most borrowers don’t see.”
For many, this study just confirms the ongoing skepticism about the sudden increase in the limit. In a Reddit thread, one user described their Chase Freedom card jumping from $3,000 to $7,500 while they still owed $2,000. “I’m convinced they increase the limits to keep us in debt. I’ve been trying to pay this off,” they wrote. “This does not help.”
Is This Happening Only in the U.S.?
To measure the impact of potential reforms, the authors of the study modeled household borrowing under policies already in place in other countries. In the United Kingdom, banks are prohibited from raising credit limits for customers in debt without their consent. In Canada, consumer permission is required for any increase.
The researchers found that if the U.S. adopted similar rules, it would improve overall consumer welfare by about one percent, reduce revolving debt balances, and lower the share of income going toward interest payments—with only a modest effect on credit access.
What Can You Do?
Well, the obvious thing would be that you can always say no — banks just hope you won’t. If your limit goes up and you didn’t ask for it, you can call your issuer and request a reversal. Some banks even let you disable automatic increases online. But the system isn’t designed to be obvious.
The tricky part is that the bank isn’t doing anything technically illegal here. In America, the bank doesn’t need your consent to increase your limit. In fact, it’s often framed as a reward for being a good borrower. But that “reward,” mind you, is really your bank betting on your low self-control — dangling a shiny toy in front of you only to charge you double for it later.
So if you’re suddenly “blessed” with more credit, maybe don’t thank the bank. Maybe ask why they’re doing it — and who really benefits. It probably isn’t you.
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