How to Increase Your Card’s Credit Limit

How to Increase Your Card’s Credit Limit

June 15, 2020         Written By Heaven Speirs

Have you ever felt your credit card did not have enough purchasing power? Perhaps you need more money for travel expenses, or you need to finance an upcoming home renovation. If you suddenly find yourself with a need for more spending power, then it is probably the right time to request a credit line increase from your card issuer. In this guide, we will explain how to increase your credit card limit through smart spending habits.

What Is a Credit Card Limit?

The credit card limit is the total amount of money available on a credit card. This is not the same as a credit card balance, which shows how much money is currently owed on the card. If you have a credit limit of $2,000, that means you have $2,000 total to spend on the card. If you spend $500, you will have $1,500 in available credit and a $500 balance. You can see all of this information on your monthly credit card statement.

Benefits of Increasing Your Credit Limit

The obvious benefit of increasing your credit limit is that you have more money available to you. If you need to make a big purchase, you know you have enough money on your card. Of course, this needs to be a purchase you can repay in a timely manner. Otherwise the increased limit will just lead to more debt.

What you may not realize is that increasing your credit limit could boost your credit score. Credit utilization rate is an important factor in determining your credit score. This is the amount of debt you have compared to your overall credit limit. The higher the credit limit, the lower your credit utilization rate. This shows that you do not need to max out your credit cards to manage your monthly expenses, which makes you look more creditworthy.

Here is an example to put matters into perspective. Let’s say you have a credit card with a $10,000 limit. You currently owe $5,000 on the card, or 50%. If your credit limit increases to $15,000, your debt only represents 33% of your available limit. Your credit utilization rate improved, even though your debt amount remained the same. That is the power of a credit limit increase.

Reasons NOT to Increase Your Credit Limit

Despite the many benefits of an increased credit limit, this may not be the ideal setup for you. Some people cannot control themselves when they have a credit card available to them. If you are one of them, stick with what you already have. It is better to have a small account that helps your score than a large account that puts you in debt. When you feel confident in your ability to handle this responsibility, then make the switch to a higher limit.

Another reason to not increase your credit card limit is if you have authorized users on the account that cannot manage money well. For example, let’s say your teenage son is an authorized user for your credit card. He frequently spends the $500 available on the card, but he pays it back when he gets a paycheck from his job. He is not responsible enough to monitor his spending yet. If your card has $1,500 available on it, your teen may rack up more debt than he can repay. Develop a solid foundation of money management skills before increasing your credit limit and debt risk. 

Credit Card Habits before You Increase Your Card’s Limit

Before you request a credit limit increase, you need to show the card issuer that you can be trusted with more funds. Start by paying down as much of your existing balance as possible. This shows the issuer that you repay your debts, and it keeps your credit utilization rate low. That boosts your credit score, which boosts your chances of getting an increased limit.

Another thing you can do to maximize your chances of receiving a higher credit limit is to update your reported household income. When granting a line of credit, credit card issuers are allowed to consider all household income to which the account holder has a reasonable expectation of access. This means that non-working spouses can report the income earned by their spouse, along with any other household income they can use to payback their loan. Additional sources of household income can include alimony, child support, dividends on investments, and government benefits such as Social Security. The more income you are able to legitimately include, the greater your chances of being approved for a higher credit limit on your credit card account.

Rather than spending cash everywhere you go, use your card instead. You can still apply that cash to a credit card payment, but you will have the added bonus of making use of your card. Not only will this build your credit, but it will also show the credit card company that you need more money than what you have. As long as you use what you already have responsibly, they should be willing to work something out for you.

Here is the habit you need to get into:

  • Get the money for something you need and put it into a bank account.
  • Pay for the item with your credit card, even if it is rent or a utility bill. Be aware of any fees associated with credit card payments.
  • Wait for the transaction to show up on your credit card account.
  • Transfer the money from your bank account and pay off the entire balance on time.

If you do that continuously, you will have an active account that is likely to receive a limit increase.

You May Get an Automatic Credit Limit Increase

Some credit card companies will automatically update your credit limit after you have been a cardholder for six months. However, this will only happen if you keep up with your payments. If you consistently pay on your account, the credit card company will feel more confident in giving you more money.

In some cases, it is better to wait for an automatic increase since that helps avoid your credit report being pulled. Every time someone looks at your credit, your credit score could experience a slight decline. Over time, multiple inquiries will eat away at the score you are trying to build.

How to Ask for a Credit Limit Increase

Did you know that 79% of cardholders get a credit limit just by asking? Moreover, the average credit limit increase is $1,500. You could significantly boost your credit limit just by talking to your card company.

If it has been six months or more since you started using your card, call to ask for an increase in your credit limit. One of the phone representatives should be able to run your information and see if you qualify. Note that if your credit score has gone down or stayed the same, you may not qualify for an increase just yet. It depends on how much you have used your card. In most cases, a consistent history of use and repayment will be enough for you to receive a higher credit limit.

Some credit card issuers allow you to request a credit line increase online or through a mobile app. If you have this option, you could submit the request digitally and get an instant response.  If the card company requires more information for the request, the decision may be delayed.

What If My Credit Card Limit Increase Gets Declined?

If your request for a credit limit increase gets declined, don’t get discouraged. This may just be because you asked about it too soon. Keep up with the plan above, and try again in another six months or a year. If something has gone wrong in your credit outside of the card, take care of that and wait a while before asking for a limit increase. You need to have something positive to bring to the table.

If you have multiple lines of credit from the same credit card issuer, you may be able to request that a portion of one line of credit be re-allocated to a different card. This will not increase your total available credit, but it can be useful if you prefer to use a particular credit card that has an insufficient credit limit. This would be beneficial if you have a rewards card with a low credit limit and a non-rewards card with a high limit. Transferring the line of credit to the rewards card would allow you to earn more rewards for the money you’re already spending.

What to Do after Your Credit Limit Increases

You got a higher credit card limit. Now what? Continue using your card just as you did before. Repay your card balance in full, when possible, or make a payment arrangement that quickly wipes away the debt. Enjoy the benefits of the increased limit, but do not be tempted to spend more than you need to. After several months of positive payment history, you should see a boost in your credit score and opportunities for more increases in the future. 

The information contained within this article was accurate as of June 15, 2020. For up-to-date information on any of the terms, cards or offers mentioned above, visit the issuer's website. Many of the offers on this article are from our affiliate partners, and LowCards.com may be compensated if you take action with any of our affiliate partners.

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heaven

About Heaven Speirs

Heaven Speirs is a contributing writer for LowCards.com. She remains up-to-date with the latest developments in the credit card industry and the financial sector as a whole. Heaven has over 10 years of experience in online journalism, the bulk of which has been focused on personal finance. Heaven attended Oklahoma State University, where she discovered her talent for research and content creation. In her spare time, Heaven enjoys painting, playing poker, and spending time with her husband and three dogs.