You’ve been a diligent consumer and you’ve paid your credit card bills in full month and month. You likely have a healthy credit score. Chances are high that you credit card company has probably already sent you an invite to increase your credit card limit. Like any consumer, you’re also probably flattered you are considered eligible for said increase. But before you go ahead and grab the so-called opportunity, here are four pitfalls going through with the increase may lead to:
Increases your debt potential
When you have a higher credit card limit, the chances of incurring higher debt also increase. This can be extremely dangerous when you hit a financial snag and can’t pay your bills in full at the end of the month. Because your limit is now higher, you will also have a tendency to overspend even on things that aren’t really necessary. If you don’t want to put your self-control in a difficult spot, you may be better off not increasing your credit limit.
Missing out on better promotions
When it comes to credit card choices, there are numerous deals and promotions available in the market. You may miss out on better deals and promotions because you thought your credit card is the one’s that’s better considering the credit limit increase offer. But just because you are eligible for said increase doesn’t mean your card is the best. Before going through with the process, make sure you take time to consider other deals and set them side by side with your current credit card. Then you can decide whether to ditch your current card or move forward with the increase.
Loans available will be limited
When you opt to increase your credit card limit, you are not tagged as a high-limit borrower which means relatively disadvantageous if you plan to take out a mortgage or car loan any time soon. Keep in mind that credit cards are high interest debts and there considered by most banks as a major liability. Again, make sure to think things through as thoroughly as you can before increasing your credit limit. It may be nice to have more balance on your card but it can also affect your loan options.
More debt for joint accounts
If you share your credit card with someone else like your spouse or your minor dependent, you are also increasing the risk of racking up more debt not because you are buying more but because your dependents are. When your minor teenager has a supplementary card handy, you can’t control his or her spending. You may end up receiving the bill at the end of the month and be shocked at the charges. To avoid these problems, don’t bother increasing that credit limit.
The Bottom Line
Increasing your credit card limit is not bad per se. There are advantages and disadvantages attached to this financial move. If you need the card limit increase for an important investment then it makes sense to go through with it. Conversely, if you believe it wouldn’t really impact your finances in a positive way then might as well forego the offer.
If you decide to decline the credit card limit increase offer, you may send your company a letter detailing your intention or you may simply ignore the letter.