Tips to Raise Your Credit Limit

Getting banks or credit card companies to raise your credit limit is not nearly as difficult as consumers think.

Sometimes, all you have to do is sit back and wait for the bank to automatically raise your credit limit. Every now and then, they’ll run a check to see what your account activity looks like. If they like what they see, they may increase your credit limit without being asked.

Tired of waiting for the phone to ring? Pick it up and call your credit card company. Just because they’re not begging you to take their credit doesn’t mean they won’t part with it. Ask the bank for a credit raise and highlight all the reasons why you deserve one. Remind them of how faithful you’ve been at making payments or let them know about a recent raise in salary. The more money you make, the better banks feel about you.

The bottom line: If you want to increase your credit limit, you have to become more appealing to creditors. Consumers with high credit scores, those who pay their bills on time and maintain clean credit histories, are very appealing.

What is a Credit Limit?

A credit limit is the maximum amount you borrow against each line of credit. If you have a credit card with a limit of $3,000, you can’t spend more than $3,000 on that credit card. Each card in your wallet has a credit limit.

Some cards have limits of as much as $100,000, but those are rare and usually found in the wallets of the super-rich.

The average credit limit varies a lot depending on your credit score. If you have a bad score, you’ll be lucky to get $2,000. A good credit score will reward you with an average limit of around $7,000. Those with the best credit scores are treated to average limits of around $11,000.

A low credit limit may feel like a constraint but starting off with too high of a credit limit is like learning to swim in the deep end. There is more room for error and less room for forgiveness if you overspend your budget.

Think about how you plan to use (and repay) the extra credit before plunging into a whirlpool of potential headaches. There are plenty of valid reasons to raise your credit limit, like increasing your credit utilization to raise your credit score.

If you’re unsure whether or not you need a higher credit limit, try getting in touch with a nonprofit credit counselor. They can walk you through the steps of budgeting so you can figure out if that credit raise will help more than hinder you.

How to Raise Your Credit Limit

1. Pay your bills on time

This is the easiest way to increase your credit card limit. Every six months or so, credit card companies review your credit and decide if your limit should be higher based on how you’re handling your money. If you pay on time — and pay off the balance every month — they should offer to raise your credit limit.

2. Ask the card company to raise your credit limit

Sometimes credit card companies won’t offer a raise, so ask for one.

Credit experts suggest that you only ask for an increase when you’ve paid your bills promptly. They also recommend waiting at least six months after you received the credit card and asking for no more than a 10% to 25% increase. Asking for more than 25% might raise questions about your intentions.

You also should use your credit card frequently and pay off the balance when it’s due. This suggests you might have a legitimate need for a higher borrowing limit and that you’re capable of paying on time.

3. Apply for a new card with a higher limit

One option is to start from scratch. Apply for a new credit card with a new company that has a higher credit limit. Note that if you close the old credit card it will affect your credit history, which makes up 15% of a FICO score. That would cause your credit score to go down. You can always keep the card open and not use it. That would help protect your credit history.

4. Balance transfer

balance transfer is when you take the money you owe on one card and move it to another card with a lower interest rate. Ask your credit card company to raise your credit limit to make way for a balance transfer.

The card company would be willing to do this in order to keep the debt on their books rather than a competitor’s. In fact, some companies offer no interest for a period of time (usually six to 12 months) to incentivize a balance transfer.

But be wary of two things: transfer fees and introductory rates. The transfer fee may wipe out any benefit you would get from the no interest promotion. And be sure to pay off the balance before the promotion ends. Otherwise, you risk losing a lot of money when the real interest rate – often somewhere around 25% — kicks in.

5. Roll two cards into one

Some credit card companies will allow you to combine two of your credit cards into one as long as they issued both cards. You pick the one with the better benefits or longer credit history and close the other one. The catch is that both accounts have to be open for at least six months, and the card that is closed has to be paid off. Again, closing a credit card will affect your credit history. This technique isn’t for those who want to raise their credit limit as a way to raise their credit score.

6. Increase your income

The more money you make the more comfortable a credit card company will feel raising your credit limit. When you receive a raise, chances are good that – upon request – your credit card company would be willing to raise your limit. You can also pick up a side job as a way to raise your income and thus raise your credit limit.

7. Wait for an Automatic Credit Limit Increase

Credit card issuers will review your accounts from time to time. If they like what they see, i.e. if your account shows responsible spending habits and regular repayments over a prolonged period of time, they may just raise your credit limit automatically.

8. Increase your Security Deposit

Secured credit cards are used to build credit from scratch. These types of cards are backed by money in the bank, which is used as collateral. If you increase the amount you have backing your card, the bank will likely agree to increase your credit limit. Call the bank directly and ask about their policy on increasing limits for secured credit cards.

Tips for Raising Credit Card Limits

Only ask for increases on one card at a time.

If you have five cards and are requesting higher limits on more than one of them, each request is considered a “hard inquiry” on your credit score, which automatically lowers it a bit. Multiple credit inquiries also suggest you have an urgent need to borrow a lot more money, something that makes lenders nervous. Allow about two months between each request to diminish the effects of a hard inquiry.

Pick your best card

Since you can only do one card at a time, start with the best one. That should be the credit card with the best benefits and the one you use most often.

When to ask for a credit limit raise

Ask for an increase to your credit limit if you’ve been awarded a raise or come across an additional source of income. Banks are more willing to increase your credit limit if you can prove you’re in good or better financial standing. If your credit score is trending upward, or if you’ve recently repaid a large sum of debt, banks will be more willing to trust you with more credit.

When not to ask for a credit limit raise

If you recently suffered a loss of income, chances are not good for a credit raise. Also, card companies will be reluctant to increase your limit if your credit score is low, especially if that’s because of missed payments. You’ll want to raise your credit score before you ask for a credit increase.

If You Are Denied Ask Why

Ask your creditor why you didn’t meet their standards for a credit limit increase. That way you will know exactly which aspects of your finances to pinpoint for improvement.

Credit Line Increase Fees

Some banks will charge a fee to increase your credit limit. The First Premier Bank Card charges consumers 25% of the limit increase. So, if you raise your credit limit by $1,000, you will pay $250.

You would be better off applying for another card without such absurd fees, or working on your credit score until the bank decides to increase your credit limit itself.

Why Would I Want a Higher Credit Limit?

Having a higher credit limit on your cards could help keep your credit utilization ratio in check, thus raising your credit score.

If you want to keep your credit utilization ratio in good standing, aim to spend less than 30% of each card’s credit limit.

Let’s say every month you spend $1,000 on your credit card, which has a credit limit of $1,500. By the end of every month, your credit utilization rate will have ballooned to 66%–double the recommended amount! This is where having a higher credit limit would help.

If you need to spend $1,000 a month on your credit cards, you need a credit limit of at least $3,000. If this sounds like a tough trick to pull, consider nonprofit credit counseling. Nonprofit credit counselors can help you get your credit in order, giving you your best shot at succeeding with your credit limit increase request.


Sources:

Josephson, A. (2018, August 20). The Average Credit Card Limit. Retrieved from: https://smartasset.com/credit-cards/the-average-credit-card-limit

Smith, J. (2018, March 26) 15 things credit card companies are hoping you’ll forget. Retrieved from https://www.marketwatch.com/story/15-things-credit-card-companies-are-hoping-youll-forget-2018-03-26

Hayes, A. (2017, June 20). Juggling debt: How transferring a balance affects your credit score. Retrieved from https://www.usatoday.com/story/money/personalfinance/2017/06/20/juggling-debt-how-transferring-balance-affects-your-credit

Gerstner, L. (2018, March 27). Family finances: Four ways to trim account fees and credit card interest. Retrieved from http://www.chicagotribune.com/business/sns-201803081609–tms–kplngmpctnkm-a20180327-20180327-story.html

Yovino, K. (2016, June 16) 6 Ways to Increase Your Credit Limit. Retrieved from: http://www.cheatsheet.com/money-career/need-some-flexibility-6-ways-to-increase-your-credit-limit.html/?a=viewall

Konsko, L. (2014, January 7) How Do I Get a Higher Limit on My Credit Card. Retrieved from: https://www.nerdwallet.com/blog/credit-cards/higher-credit-limit/

Bertagnoli, L. (2013, May 10) How to Ask for a Credit Limit Increase. Retrieved from: http://www.creditcards.com/credit-card-news/how-raise-credit_limit-1267.php

ValuePenguin, (2016, October 10) How to Negotiate a Higher Credit Limit. Retrieved from: http://www.csmonitor.com/Business/Saving-Money/2016/1019/How-to-negotiate-a-higher-credit-limit