More people are asking for and getting credit card limit increases. Here’s why.

With the holidays in full swing, more shoppers are requesting increased credit limits as lenders get stingier about issuing them new cards, experts say.

The application rate for credit card limit increases is rising, as well as the approvals for them, the New York Federal Reserve said last month. Meanwhile, even as the rate for credit card applications remains robust, more are getting rejected, it said.

“After COVID, inflation and interest rates went out of control … people have less emergency funds for car repairs or buying presents,” said Brandon Robinson, president and founder of JBR Associates, which specializes in retirement strategies. “What they’re doing is using more credit card utilization – over 30% or well over 50% of their credit card allowance – and then can’t get approved for another card because their credit rating is down.”

Because of that, people either have to make more money or request a higher credit card limit, he said.

Who’s asking for higher credit limits?

For 2023 overall, the application rate for higher credit limits increased to 14.4% from 11.5% in 2022, with the largest increase seen among consumers with credit scores under 680, the Federal Reserve Bank of New York said. More of those requests have been approved and rejection rates have declined to 30.9% this year from 35.3% in 2022.

In October, the application rate jumped to 17.8% from 11.2% in the same month a year earlier, and from 12.0% in 2019, New York Fed data showed.

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Why are people asking for higher credit limits?

• After three years of elevated inflation and wages mostly falling behind rising prices, Americans are likely tapped out and turned to credit cards to stay afloat, JBR Associates’ Robinson said. Credit card debt has reached a record $1.08 trillion, according to the New York Fed. And average debt is $7,951, at least a 10-year high, based on 2022 data from the Federal Reserve and the U.S. Census Bureau.

Carrying higher balances and more credit cards can make it harder for Americans to continue getting cards without damaging their credit score.

A new credit card application usually requires a lender to see your credit file in what is called a “hard inquiry” of information and lowers the average age of your credit accounts, or the average time all your accounts have been open. The average age of your accounts can indicate your experience with handling debt. Both can weigh on your credit score.

Depending on the lender, a credit card limit increase may only require a credit check, or “soft inquiry,” which doesn’t harm your credit score, and keeps the average age of your credit accounts the same.

• Asking for a credit line increase may be preferable if you already have multiple credit cards, according to credit scorer Equifax. “Once you go beyond two or three cards, keeping track of monthly payments could get confusing, especially if the accounts have different due dates,” it said.

• Banks have grown pickier about who gets credit cards as the economy slows and the short-term benchmark fed funds rate sits at a 22-year high.

• A higher credit limit can boost your credit score by lowering your credit card utilization, or the percentage of available credit that you’re using. A ratio above 30% can negatively affect your credit score. If your limit gets raised, your utilization ratio drops, and your credit score rises as long as you keep your spending nearly the same.

Why are credit card applications getting rejected?

Banks are tightening lending standards with the rise delinquencies, which have jumped above pre-pandemic levels, especially among millennials, the New York Fed said. Millennials are generally those born between 1981 and 1996.  Plus, banks are less likely to approve credit cards for people with FICO scores of 620 and 680 than at the beginning of the year, a Fed survey released last month showed.

The average rejection rate for credit card applications during 2023 increased by 1.1 percentage points to 19.6%, the New York Fed said.

How do you get your credit card limit raised?

You can either call your credit card company or make a request online. The company will consider things such as:

• Credit score and report.

• Number of new credit applications you’ve recently submitted requiring “hard” inquiries on your credit report.

• Employment status and income.

• Expenses, including housing costs and debt obligations.

Is having a higher credit card limit good?

Yes, as long as you don’t use it as a license to spend more and carry more debt. A higher credit limit lowers your credit utilization ratio, which can boost your credit score, and prevent you from having to manage many credit cards.

If you end up using the extra credit and accumulating more debt, you’ll likely just end up worse off with more high-interest debt to pay down.

Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.

This article originally appeared on USA TODAY: Credit card limits up. New applications rejections up. Here’s why.