Using credit cards wisely and having a healthy payment history has its perks—like receiving a credit limit increase.
Some credit card companies will grant you a credit limit increase automatically; in other cases, you’ll have to request a limit increase on your own.
In this post, I’ll go over why it’s important to increase your credit limit once you’ve had your credit card for a while, and the steps you should take if you want to request an increase on your own.
What a credit limit increase is not
A credit limit increase should not be seen as a reward or a free pass to spend extra money you don’t have. Seasoned credit card users know that viewing credit cards as free money can land you in some debt if you start spending more than you can afford.
If your credit limit starts out as $1,500 then gets increased to $2,100, sure, it can seem like you have some extra wiggle room.
Most credit card issuers agree to increase your limit in the hopes that it will lead you to spend more money. If you don’t spend money each month on your card, they don’t make as much money off of your account in interest and fees.
Credit cards should be used as a tool to boost your credit score, whether your limit is $300 or $10,000.
Why should you get a credit limit increase?
So you shouldn’t get a credit limit increase just for the thrill of having more money to spend. So why should you get one?
The best reason to increase your credit limit on your credit card is so you can maintain a low credit utilization rate, which can help increase your credit score.
If you have a low credit limit like $500 or even $1,000 for example, it can be hard keeping your utilization rate below 30 percent, which is the amount recommended by most credit bureaus.
The lower you keep your total utilization rate, the better. For example, if you have a credit limit of $1,000 and you want to keep your utilization around 20 percent of your total limit, that means you can only spend around $200 per month.
Spending more than that will hurt your credit score if your limit remains low because your total utilization will increase. With a higher credit limit, it’s much easier to keep a low utilization rate overall.
Another great reason to have a higher credit limit is for emergencies. While it’s important to have a robust emergency fund to cover unexpected expenses, it also wouldn’t hurt to have a high credit limit available to cover a large expense without sending your credit utilization rate into the red zone.
Credit cards shouldn’t be used to make an impulse purchase or justify buying something you can’t afford, but life happens and it’s best to be as prepared as possible—which is why we choose to build credit in the first place.
If you’re ready to request a credit limit increase from your card issuer, here are the steps you need to take.
Step 1: Find out if you qualify
Unfortunately, you can’t just increase your credit limit without the credit card company’s approval. Some companies and banks like to see cardholders meet certain qualifications before they grant a credit limit increase.
Generally, the bank will want to see that you’ve been a card holder for a certain amount of time. Then, they may review your payment history and usage of your existing available credit.
They may also want to see where your credit score currently stands and if your income has changed at all.
Step 2: Request an increase
Some banks require you to request a credit limit increase by phone, but most will allow you to do it online. Whether you have a credit card with Chase, American Express, CapitalOne, Barclays, or another bank, the process will vary slightly.
To request a credit limit increase online, you’ll need to log into your account and see if there’s an account services page where you can put in a request to increase your credit limit. See if your bank has an FAQ page which will explain how to put in a credit limit increase request and how to find out if you’re approved.
Some banks will allow you to choose the amount of your increase while others will determine it for you.
Step 3: Use your higher credit limit wisely
If you are approved for a credit limit increase, your bank will notify you and it will be available immediately. This doesn’t mean you should run out and make a ton of extra purchases.
You should use your credit limit increase to keep your total credit utilization low for your credit card (below 30 percent) and continue to pay your balance off in full each month.
You might even want to request a credit limit increase with any other credit cards you have as well.
What if you don’t get approved?
If you don’t get approved for a credit limit increase, you may receive a letter in the mail from your credit card company explaining why.
Their decision could be based on a number of factors.
On the bright side, you could try your request again later. You can clear up any of the issues your credit card company pointed out that prevented you from getting approved for a credit limit increase. Some companies might ask that you wait for a specific period of time before putting in another request.
This could help provide you with enough time to make changes that could help you get approved the second time around, like making your monthly payments on time, paying more than the minimum amount each month, and so on.
Summary
Requesting a credit limit increase can be a great way to improve your credit score as long as you commit to using credit cards properly and not viewing the increase as extra money you can use to overspend.
