Beware No-Spending-Limit Accounts

When I was a lot younger, I acquired an American Express Green card. I don’t remember if I sought out an application or if American Express sent me an invitation to join. I do remember that I applied just to see if I could get one. American Express granted me its card. I sent it back and canceled the account. I felt that the last thing I needed was a card without a spending limit or a $58 yearly fee just to hold the card.

Some years ago American Express ran an advertising campaign pitting itself against Visa and MasterCard with their credit limits. In one of the commercials a businessman is out to dinner with clients and suffers the embarrassment of having his Visa declined when he attempts to pay the check. In another commercial a newly engaged couple is ring shopping. The woman chooses her ring and is elated. The man hands over his credit card to pay for the ring and doesn’t have enough available credit. American Express was there to save the day with its no spending limit.

The commercials always bothered me. If consumers were maxed out on their existing credit cards, how was adding another account with no limit going to help? Wouldn’t that just make their financial situations worse?

I’ve since come to find out that the advertised no spending limit is a gimmick. No matter what you spend each month, the creditor is reporting that your account is at the limit with no available credit left. This does not help your credit report nor your credit score.

The inaccuracies in this kind of reporting can harm your ability to get credit as well as the interest rate you pay on a loan. You are better served with an account that reports the limit instead of the balance spent as the limit.