Increasing Your Credit Card Limit: Good or Bad Idea?

Most consumers understand that credit limits on credit cards are variable. This means that they can go up under certain conditions. Often, credit card companies will reward good customers by automatically increasing their credit card limit. But do you have to wait for the company to take action or can you do that yourself?

First, it is important to fully understand what a credit limit really is. Some consumers believe that it is the amount of money—or credit—that they can use to buy things with using the card. This is not exactly true. The usual credit limit for consumer credit cards is the total amount of credit that can be applied to the card. This means that you need to take into account not only purchases but also other costs such as cash advances, fees, service charges, balance transfer fees and finance charges.

It is also important to understand that a credit limit is a set amount of credit, and if the consumer goes over this limit he or she may have to pay a penalty. Increasing the credit limit can help consumers avoid these high-cost penalties as well as offer the consumer more buying power.

So how does one go about getting a higher credit limit on credit cards?

The first step to take is to find out what the procedures are for your credit card company. Most companies will have literature on this subject and all you have to do is ask for it. The reason for requesting this literature before asking for the increase is so that you can learn what requirements are. In some cases, an increase in credit may be decided based on income level or number of years with the company. If you fall below these levels, you are probably wasting time in requesting an increase with that particular company.

The next step is to think long and hard on your past payment record with the company. If you have been late with paying your current bills, chances are the company will not approve a higher level. Look at it from their point of view. If you are having trouble now, you will most likely have even more trouble if you get any further into debt with them.

Two other issues that the credit card company will look at when determining if they should increase your credit limit are the length of time that you have been with the company, and if you are maxed out on the card you have now. The longer you have been with a company, the better your chances will be. Also, if you are maxed out on your card, you may find some lenders less likely to approve more credit until they see how you handle this current debt.

If you have been with your credit company for a few years and have been diligent in making your payments on time, you will have a fairly good chance of being approved for a higher credit limit. For those who fall into this category, the best way to get an increase in your credit limit is to simply ask for it. You may be surprised at how often approval will follow.

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