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When should you request a credit card spending limit increase?

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When you first opened your credit card account, the spending limit seemed reasonable, but it doesn’t cut it anymore. You’ve thought about asking the credit card company to increase your limit, but you’re not sure it’s a wise move.

Read: The main things to consider before applying for a new credit card
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About 95% of American adults have a credit account opened in their name, according to Experian. Along with that comes a total of over $ 756 billion in unpaid credit card debt – something you don’t want or, if you already have it, don’t want to rack up even more.

“A request to increase your credit card spending limit can be a good idea if you consistently exceed the 30% utilization rate, even if you pay off your entire balance each month,” said Justin Green, CFP®, MSPFP, Founder of AssistFP. , a virtual financial planning company based in the Boston area. “A balance greater than 30% of your available credit will negatively impact your credit score. “

See: 10 Things to Do Now If You Have a Credit Score of 500

However, he said having more credit available to you isn’t always wise.

“It’s not a good idea to ask for a higher spending limit if you’re at your max and looking to spend more on the card,” he said. “This most likely means you have a spending problem and should seek help with your cash flow problems, instead of taking on more debt.”

When used responsibly, Katie Ross, executive vice president of American Consumer Credit Counseling, a nonprofit debt consolidation company, agreed that a higher credit card spending limit is usually beneficial.

“You’ll have more purchasing power, and if you don’t significantly increase your spending (remember the ideal 30% credit usage rule), having a higher limit allows you to increase your credit score, ”she said.

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She said a changing lifestyle – i.e. buying more furniture for a new home or more groceries for your growing family – is a common scenario where it’s a good idea to increase. your credit limit.

“Again, just make sure you’re only using 30% or less of your credit,” she said.

Of course, Ross said asking for a credit limit increase isn’t always a good idea.

“For example, if your credit is poor, don’t ask for a limit increase – it triggers a serious investigation of your credit report, which can hurt your credit,” she said. “Or, if you think you’ll be tempted to spend too much money, or find it hard to pay your bills, a raise will not benefit you at all.”

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Plus, she said if your income goes down – as well as your purchasing power – you shouldn’t be looking for more credit.

If you do decide to apply for additional credit, Ross said remember that comes with increased liability.

“Charge within your means – always remember that a credit card is a tool, not free money,” she said. “You want to be sure that you will be able to foot the bill every month. “

Lamar Brabham, CEO and Founder of Noel Taylor Agency Financial Services, a financial services company in North Myrtle Beach, South Carolina, also stressed the importance of making sure you can handle extra credit.

“While it’s good to have multiple credit cards and other types of debt when trying to build a good credit rating, you need to be able to cope with all of the different payments,” he said. -he declares. “Lenders like to see that you can handle multiple debts at once. “

Therefore, he said it’s important to be smart with your extra credit – if you do decide to have it, it’s a good idea.

“Even though your income may bear additional financial obligations, there is always a risk that your situation will change due to job loss, illness or a number of factors,” he said. declared. “Remember, just because you’re being offered more credit doesn’t mean you have to take it. “

Find out: why it’s always better to use your credit card over your debit card

Brabham also noted that asking for a credit card spending limit increase isn’t the only way to get more purchasing power available to you.

“Asking for a raise rather than taking another credit card is also something to consider,” he said. “Again, you have to manage your debt, and too many separate accounts can be confusing and lead to errors, such as late payments.”

If you find a new credit card with rewards that match your lifestyle, he said this route might make more sense.

“Use your credit card for everyday purchases like gasoline, food, etc., then pay off the full balance at the end of each month,” he said. “It will show that you can use credit and it is also the best way to avoid overspending problems.”

See: What happens when you are denied a credit card and what to do next

He said remember that your credit score will go down in the short term, whether you increase your spending limit on an existing card or open a new account, but when used correctly it will increase even more over time. time.

“Ultimately, increasing credit through the same card or purchasing a new card will improve your overall credit situation – as long as you don’t get confused,” he said. “Check your credit score regularly and never bite more than you can chew. “

Basically, no two people have the same credit situation, so only you can decide if asking for an increase in your spending limit is the right decision for you. Take the time to think it over in order to make the best choice for your finances.

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Last updated: October 5, 2021

This article originally appeared on GOBankingRates.com: When Should You Request a Credit Card Spending Limit Increase?


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