How do I raise my credit card limit?
If you want to get the limit on your credit card increased, you have one of two options. The first is to contact your credit card company and ask them to raise your limit. The second is to earn limit increases by practicing responsible credit.
Be aware that there is risk associated with having your credit card limits increased. Higher limits are always a temptation for us to spend more money than we should. A recent Consumer Reports survey illustrates this tendency with a couple of interesting statistics.
First, the survey suggests that as many as 13% of all U.S. credit card holders have outstanding balances in excess of $10,000. The average balance among these consumers is a frightening $17,000. Second, 11% of the respondents indicated they were charging more to their credit cards at the time of the survey than they were the year before.
Should I bother to ask directly for a credit limit increase?
If you sincerely believe you need a limit increase, you can always contact your credit card company and ask them directly. This is not necessarily a bad idea if you have a legitimate reason for doing so. For example, you might be the type of person who prefers the convenience of using a credit card for regular purchases rather than cash. If so, you might also pay your balance in full at the end of the month.
In such a case, if your limit is so low that you can’t make all of your regular purchases with a credit card, asking for a limit increase may be beneficial. However, if you want a higher limit simply because you’re already maxed out and you want to buy a new flat screen TV, asking the credit card company is not a good idea.
Will asking for a higher credit limit affect my credit report?
Every time your credit report is accessed, credit-reporting agencies record what’s known in the industry as a hit. The only exceptions to this are inquiries made directly by you or by one of the three major credit-reporting agencies. However, for everything else, your credit report will register hits for every access. The more hits found on your credit report, the lower your overall credit score will be.
Knowing this, many experts in the industry recommend you do not ask directly for a credit limit increase more often than every six months. Every time you ask for an increase, your credit card company is going to pull your credit report and register a hit. More hits mean a lower score; a lower score means higher interest rates on your credit cards.
If I don’t want to ask for a limit increase what
are my other options?
The only other way for you to get a credit limit increase without asking is to earn it. Credit card companies have specific guidelines they follow which will result in automatic limit increases throughout the life of your account.
When they raise your credit automatically, it is because you have demonstrated good credit management over a period of time. This is the better of the two methods of increasing your credit limit. The following are some of the things you can do to encourage automatic credit limit increases.
Pay your balance in full – Credit card companies don’t necessarily want you to pay your balance in full every month because they don’t collect any interest that way. They still do make a profit though through the transaction fees they charge banks and payment processors. If you pay your balance off in full every month, the only way for a credit card company to earn more money on your account is to offer you a higher limit. The more money you spend, the more they will collect in transaction fees.
Pay more than your monthly minimum – If you can’t pay your balance off in full at the end of the month, at least consistently pay significantly more than the minimum amount due. This demonstrates to the credit card company that you are responsible with your finances and can be trusted in the future. They are more likely to gradually increase your credit limit under these circumstances.
Use your credit cards frequently – The more you use your credit cards the more likely you are to be in good standing with your credit card companies. Obviously, the one caveat to this is that you pay your balances down as far as possible at the end of the month. If you regularly charge $1,000 per month to a card with a $5,000 limit, and you only pay $100 a month on your balance, you won’t be getting a limit increase anytime soon.
Make your payments on time – The one thing credit card companies hate the most is a delinquent payer. If you consistently stretch your payments right to the edge of the grace period or beyond, you are telling the credit card company that you are overextended. You are also planting the suggestion in their minds that default is imminent. If you want your credit limits increased, you must be diligent about making all of your payments on time.
Whether you ask for higher credit limits or you earn them, be careful to avoid the temptation of maxing out your credit cards and then not being able to afford the monthly payments. Credit cards are good tools, but only if used responsibly.