Should We, or Shouldn’t We Share Credit Limits?

By Michael C. Dennis

There is ongoing debate about whether creditors should inform customers of their credit limits. Transparency helps customers understand their purchasing capacity and the restrictions set by the supplier’s credit department, reducing disputes and unexpected order rejections. It also encourages responsible purchasing and timely payments by setting clear expectations. When customers know their limits upfront, they can plan their orders accordingly, preventing issues such as overextending credit or unexpected credit holds.

However, disclosing credit limits carries risks. Customers may perceive the limitation as a lack of trust, potentially straining the business relationship. New applicants, in particular, may feel discouraged if they believe the limit is too low, viewing it as a sign that the supplier lacks confidence in their ability to pay. This perception could push them to seek alternative suppliers offering more generous or flexible terms.

Additionally, some customers may treat the limit as an entitlement rather than a guideline, potentially maxing it out even if their actual needs don’t justify it. Others might attempt to negotiate for higher limits right away, leading to ongoing credit discussions rather than focusing on building a reliable payment history.

Ultimately, striking the right balance between transparency and flexibility is essential. While providing credit limit information can improve clarity, maintaining some discretion allows creditors to adjust limits based on actual payment performance, strengthening both financial control and long-term business relationships.

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