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  • Frank Tian

๐Ÿ’ฐ Review Your Product Limit Cap

The latest US inflation number is out.


It is in the right downward direction but still high.


Latest 12-month inflation readings:


๐Ÿ‡บ๐Ÿ‡ธ US 6.5% (Dec โ€˜22)

๐Ÿ‡จ๐Ÿ‡ฆ CA 6.8% (Nov โ€˜22)

๐Ÿ‡ช๐Ÿ‡บ EU 9.2% (estimate for Dec โ€˜22)

๐Ÿ‡ฌ๐Ÿ‡ง UK 10.7% (Nov โ€˜22)


If your business has not done so in recent years, it is time to review your lending productโ€™s limit cap.


Especially for those with a limit of $2,500 or below, such as small-dollar loans, small-dollar lines of credit, and retail credit cards.



๐Ÿ“Œ Take a loan in the US as an example:


In terms of purchasing power, a $1,000 loan in Dec 2019 = a $1,156 loan now.


$1,000 * (1 + 1.4%) * (1 + 7.0%) * (1 + 6.5%) = $1,156.



For a higher-limit revolving product such as bankcard, this is less of an issue - suppose the lender has resumed the credit line increase (CLI) program after the initial fear in 2020.


For small-dollar lenders, without proper adjustment, you are losing business in the increasingly competitive market. Do you know Wells Fargo is starting to offer small-dollar loans?


If you raise the limit cap from $1,000 to $1,100, that will bring a significant boost to your portfolio balance and revenue.


Of course, you need the proper credit strategies.


Good thing is that many tools are available today - traditional credit data, alternative credit data, income verification services, and open banking solutions.


Have you raised the limit cap recently?


* Inflation numbers used in the example are from December 2020/2021/2022. Source: US BLS.

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