In the commercial credit granting community, there is an ongoing
debate about whether or not a creditor should routinely inform customers
about their established credit limits. On one hand, doing so ensures that
the customer understands the limitations imposed by the supplier's
credit department. On the other hand, there are risks associated
with doing so including potentially damaging the goodwill between
the new customer and a potential supplier. The advantages of telling
the customer their credit limit include:
The opportunity to talk to the customer about the company's
payment expectations and the seller's concerns.
The opportunity to discuss how the credit limit might be increased
in the future - and how soon the credit department will re evaluate
its original decision .
The opportunity to offer suggestions or advice that may help
a marginal customer to become more successful and profitable.
Because doing so reduces the chances of encountering a potentially
embarrassing situation in which a relatively new customer places
an order well in excess of the credit limit and the creditor
must hold it.
Some of the disadvantages of sharing this information with your
The customer may self-regulate their purchases so the credit
limit is not exceeded, even when the creditor might consider
releasing additional orders on open account terms after updating
contained in the credit file.
An applicant may be offended at whatever credit limit is assigned
to the account. There is simply no way to know how a customer
will respond to the assigned credit limit - no matter how large
the credit limit might be.
Generally, it is a no win situation to try to explain how and
why the credit limit was set as it was.
The customer may incorrectly believe they are unworthy of a
larger credit limit even after they have proven to the satisfaction
the creditor that they would qualify for a larger credit limit
- if asked.
If you choose to inform a customer about what their credit limit
is, I recommend that you inform the customer that the credit limit
is not actually a limit - it is a guideline. Should the customer
want additional credit now or in the future, they should be encouraged
to contact the credit department or the salesperson to discuss ways
to increase the line. The last thing that any creditor company wants
is a customer not placing orders because they think they are at or
over their credit limit.
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