2 Pros and Cons to Getting Your Credit Card Limit Increased

When you sign up for a credit card, you’ll often be asked to disclose your income. And that number can help determine what spending limit you’re given.

Credit card companies need to be careful when extending credit to borrowers. So if you earn $150,000 a year, you might get a higher spending limit than someone only earning $50,000, since you’re more likely to be in a position to pay off a larger balance.

But the credit card limit you start out with isn’t necessarily set in stone. Over time, it may be possible to get that limit raised by virtue of being a cardholder in good standing. And if your income rises notably, that alone will often do the trick of scoring you a higher spending limit — though you’ll generally have to reach out to your credit card issuer and ask for an increase in that situation.

You may be tempted to get your credit card limit raised. But before you do, consider the pros and cons.

Pro No. 1: More spending power

The higher your credit card limit, the more options you get to charge expenses. That could come in handy if you’re forced to cover a major home or car repair in a pinch and don’t have enough money in an emergency savings account to pay for that expense in full.

Plus, there are periods during the year when your spending might increase, such as during the holidays. Not having to worry about maxing out a credit card could make times like that less stressful.

Pro No. 2: It might help your credit score improve

One big factor that goes into calculating your credit score is your credit utilization ratio. That ratio measures how much of your available credit you’re using at once.

A ratio of 30% or less is usually favorable from a credit score perspective. And raising your credit limit could help that ratio shrink.

Let’s say you only have one credit card and owe $3,500 on a $10,000 limit. That’s a credit utilization ratio of 35%. But if you get your credit card limit raised to $15,000, that $3,500 balance only represents about 23% utilization, which is far better from a credit score perspective.

Con No. 1: You may be tempted to spend more

The more spending power your credit card gives you, the higher a balance you have the potential to rack up. That could cost you a lot of money in interest.

If you’re someone who’s had trouble keeping their spending in check in the past, then you may not want to ask for a credit card limit increase — even if you’re confident you can qualify for one. You don’t need to open the door to temptation and set yourself up to land in a pile of debt.

Con No. 2: Your credit score might take a dive

If you raise your credit limit and then your spending on your card follows suit, it may not help lower your credit utilization ratio at all. And if anything, it might put you in a position where you then can’t make your minimum monthly payments. That could really damage your credit score, since your payment history carries even more weight in calculating that number than your credit utilization ratio.

Be careful either way

It’s one thing to ask for a credit card limit increase because you feel you need extra spending power, or because you want to improve your credit score by virtue of a lower credit utilization ratio. But if you don’t need the added leeway to charge expenses and your credit score is already in good shape, then it could pay to just let things be.

And if you do decide to ask for a credit card limit increase, try, in your mind, to stick to your former limit anyway. That could lower your chances of getting into a bad financial situation.

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