There are major benefits to having your credit limit increased, but overspending is not one of them. In this case, a credit card limit increase is a smart choice. It will also cover the benefits of having your credit card limit upgraded. There are several advantages to increasing your credit card limit and this will be covered extensively.
We will also let you know the best way to use a credit card. Let’s start with understanding credit card limits.
What is a credit card limit?
Your credit card limit is the maximum amount of funds available for spending on your credit card. Any spending beyond this limit may not be possible or may attract higher interest charges, putting your account in debt and potentially impacting your credit score. Credit limits are determined differently for secured and unsecured credit cards. For secured cards, the credit limit is determined by the security deposit you pay upfront, while for unsecured cards, the issuer considers your credit score, company policy, and other factors to determine your limit.
You must understand that your credit limit is the maximum loan amount made available to you by your credit card company.
Is it possible to increase your credit limit?
While you typically do not have control over your credit limit, there are ways to increase it. When you apply for a credit card, the issuer will typically determine your credit limit based on a variety of factors, including your credit score, the type of card you applied for, and their own policies.
Over time, your issuer may periodically review your repayment history and income growth. If they see that you have been consistently making on-time payments and your income has increased, they may increase your credit limit without any action required on your part.
However, if you believe that you deserve a higher credit limit, you can contact your issuer to request an increase. To do so, you’ll need to provide evidence that your income has grown and that you have been making timely payments on your balance. By making a compelling case, you may be able to persuade your issuer to increase your credit limit.
Your credit card company may increase your limit following a review.
Benefits of increasing your credit card limit
Below are some of the benefits associated with credit card limit increase:
Additional funds
The higher the credit limit on your card, the more fund is available to spend. Having a higher credit limit on your card may provide you with more available funds to spend, it’s important to be cautious about how you use that extra credit. It’s never a good idea to spend money simply because it’s available, as this can lead to financial difficulties in the future.
Reduces credit utilisation ratio
Your credit utilisation ratio is the amount of money you spend monthly out of your available credit. It is utilising the available credit in a way that impacts your balance. If you have a constant amount of money that is spent monthly on your credit card, maintaining that same expenditure after having your credit limit increased demonstrates a reduction in your credit utilisation ratio.
Opportunity for higher loans
Having more credit limits on your card pre-qualifies you for higher loans. The loans can be applied to housing, vehicle, education, and business needs. Even if you don’t avail yourself of the extra loan benefits, the opportunity boosts your credit score.
More rewards and perks
With higher credit limits come additional rewards and perks that you can get by making purchases using your card. The rewards can be in the form of cash, gift cards, redeemable points, and purchase discounts among other perks. You can apply the rewards to travel, rent, grocery, and other purchase needs. This way you can utilise credit card limit increase.
Conclusion
It’s important to avoid the mistake of thinking that you need to spend up to your credit limit just because it’s available to you. The best approach to using a credit card is to keep your spending well below the credit limit. This is the best way to use a credit card. You can still qualify for credit increases without actually using them unless you have an emergency situation that requires it.