Ask the grumpies: Should I raise my credit card limit?

Nanani asks:

Opinions on the merits of raising the credit limit on one’s credit cards?
I am at the point where both my credit cards (a VISA and an MC, in different currencies; I have lived in multiple countries) have a balance of essentially zero. I use them every month to pay subscriptions and occasional online purchases, but I pay the full balance every month now.

Since I’ve reached the point where I can regularly do that, the credit card companies have been sending me offers to increase my credit limit at a greater frequency.
Right now it’s ~10K (thumb conversion to USD) and I don’t feel the need for more, but I thought I’d ask and see what the prevailing wisdom is.

TL;DR: Raise credit card limit: YES/NO? Why/not?

The conventional wisdom is that if you are bad with credit and need hard limits to keep from over-spending, then do not raise your credit limit.

Otherwise, if you’re the kind of person who ignores credit limits because you’ve never hit one and you have complete control of your spending, raising your credit limit may increase your (US) credit score because it will increase your available credit ratio.  Since credit card companies generally hold liability for fraudulent purchases, this should come at no additional risk.  This will also make the occasional large purchase (that you plan to pay off immediately) a bit easier because you won’t have to break it up across cards and you’ll be able to get the benefit from rewards.  Note:  all of these answers are US based– we don’t know how credit card companies work in other countries.  (And, as always, do your own research and/or talk with actual professionals before making any major money decisions.  We are not actual professionals.)

Grumpy Nation:  What do you do when the credit card company wants to raise your limits?

8 Responses to “Ask the grumpies: Should I raise my credit card limit?”

  1. Solitary Diner Says:

    I get phone calls/letters about raising my credit limit all the time. I have a limit of about $15,000 on my credit card already, so I’ve never felt the need to increase it further. I do find the letters hilarious though. They encourage me to “make sure I have enough credit for unexpected purchases”. What kind of “unexpected purchases” are people making for over $15,000?

    • nicoleandmaggie Says:

      sometimes you just find yourself with a yacht, you know?

    • Leigh Says:

      To have a good credit score you should keep your utilization under 30% of your limit, lower if you can. So that means with a $15,000 limit, you should keep your balance below $4,500.

      Once my husband and I got married and started consolidating more of our spending, a credit card with a high limit was really useful in high spending months. We were able to get one of my cards raised to a $40,000 limit which has been very useful so that I don’t have to be constantly making extra payments.

  2. Nanani Says:

    Thank you!!
    This fits nicely with what I’d read, but asking here is a great reality check from actual people.

    Indeed, I haven’t hit my credit card limit since the very earlier time I had my own card, when the limit was low and my spending was frankly dumb (I was 19).

    The companies are the same ones as the US, though subject to slightly different rules and regulations, and my credit score has been high every time I checked. It does seem like it can’t hurt to keep increasing the limit, all things considered.
    So I’ll go ahead and respond to those offers, then.

  3. Katherine Says:

    I just had my limit raised – right after I had to split a big expense across two payments and pay the card off in between. I always pay the full statement balance every month, so I figure there is no downside to having a high limit. The letter that came with the credit line increase suggested that one could use the higher limit to pay for home renovations, which would be dumb if you were going to leave the balance on the card but smart if you can get credit card rewards instead of writing a check.

  4. chacha1 Says:

    I’ve had a Bank of America credit account for a really long time, and at one point they had kept raising the limit until it was over $20K. I thought that was ridiculous, so I called them up and told them to lower it. They were SO CONFUSED and argued forever and finally they counteroffered with splitting that credit limit over two cards. I let them do that, used the split card once, paid it off and then cancelled it. So now I have the one card with a $12K limit. :-)

    My feeling is that it’s a bad idea to have credit card limits that exceed what you could pay off from cash within two months. It is just too easy to let balances ride and keep paying those interest charges … I did it for a long, long time and it cost me an awful lot of money. And it was a tether to whatever shitty job I had. When you’re carrying debt, you really have no financial freedom because you always have to worry about making that payment.

    The credit card limits I have now, between BofA and my operational Capital One card (which I’ve also had for a really long time), exceed what I could pay off from cash; so I don’t use the BofA card at all. It’s in a drawer with a zero balance and I will only get it out in a true emergency.

  5. gasstationwithoutpumps Says:

    I’ve never hit a credit card limit and have never bother raising the limit. I don’t even know what my limits are (probably whatever the default is on a new card). I rarely have a credit-card bill over $2k—generally only when I’ve bought airline tickets for a family trip.

    My credit rating is good, but I don’t care about it, since I have no intention of borrowing money again now that my mortgage is paid off and I’ve saved enough for my son’s college education.

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