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Times are tough in the financial world. With the pandemic continuing to wreak havoc on the market, banks have updated policies and tightened rules. One place where this directly affects consumers is in their lines of credit.
Whenever the economy enters a period of uncertainty, it's reasonable to see banks lower credit lines and close inactive accounts. This practice serves to limit the bank's exposure and lower its burden of risk. But, while it may make sense for the bank, it's naturally pretty inconvenient for its customers.
Unfortunately, Chase appears to have taken this opportunity to expand its notorious 5/24 policy. More specifically, Doctor of Credit reports that cardholders have recently been denied a credit limit increase for being over 5/24.
What is Chase's 5/24 Policy?
The Chase 5/24 policy is one of the most infamous application rules in the world of credit card rewards. It started as a rumor in 2015 when reports indicated that Chase wouldn't approve applicants for a card if they had five or more new accounts in the last two years. It remained unofficial until Chase briefly included it on a Chase Sapphire Reserve® application page in 2016. They didn't mince any words:
“You will not be approved for this card if you have opened 5 or more bank cards in the past 24 months.“
That made it official. Over the years, we've seen Chase continue to expand this policy: first to all Ultimate Rewards-earning cards, then certain co-branded products. Now, virtually all Chase card products are subject to the 5/24 rule.
What does that have to do with my credit limit?
With the current financial climate, banks curbing credit limit increases isn't surprising in the least. However, what has caught some people off guard is Chase using a policy (assumed to be) designed to combat credit card application abuse to make the decision.
In reality, the decision to not extend further credit to someone—in any financial climate—is based on risk assessment. Banks want to know that you won't default on the card or miss payments. This is why applications for a credit limit increase often involve at least a soft pull on your credit report. Does this mean that 5/24 was meant as a risk-management tool all along?
The answer is ‘probably not'. In general, Chase simply seems to be reigning in how much credit it extends to customers. While we've never seen the 5/24 policy used this way, it's ultimately not that surprising for Chase to use it as justification for denying limit increases.
Chase has tightened up a lot in response to the shifting financial climate. We've seen far more application denials than usual, and more than a few people have had their extended credit lines lowered. With that in mind, it stands to reason that Chase would be stricter with credit limit increases.
It's still unclear whether Chase is implementing this rule across the board. If you're contemplating applying for an increase in your credit limit, double-check your 5/24 status before applying—just to be safe.
Have you been denied a credit limit increase because of your 5/24 status?
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