Question

what changes when a credit card company raises your spending limit? (1 point)

○ your credit score automatically improves

○ you can charge purchases up to the new limit

○ the credit card company charges higher rates

○ you must immediately pay the full amount

Explanation:

• Analyzing "Your credit score automatically improves": A credit limit increase doesn't guarantee an automatic credit score improvement as credit score depends on multiple factors like payment history, credit utilization ratio (which may change but not always improve the score automatically), etc. So this is incorrect.
• Analyzing "You can charge purchases up to the new limit": A spending limit (credit limit) increase means the maximum amount you can charge on the credit card is raised to the new limit. This is the direct effect of a credit limit increase.
• Analyzing "The credit card company charges higher rates": A credit limit increase is not directly related to the interest rate charged by the credit card company. Interest rates are determined by other factors like creditworthiness, market conditions, and the card's terms, not just the credit limit. So this is incorrect.
• Analyzing "You must immediately pay the full amount": A credit limit increase has nothing to do with the requirement to pay the full amount immediately. Credit card payment terms (like minimum payment, full payment option) are separate from the credit limit. So this is incorrect.

Answer:

B. You can charge purchases up to the new limit