Hi. My name is John Ulzheimer, and I'm a credit expert who contributes to
Creditcardinsider.com.
Today's question is very simple... How can I raise the credit limit on my credit card?
It's an excellent question because a lot of people
over the time of using a credit card become
either, very used to using it, they benefit from using it, some people become dependent on using it
which is a little dangerous. But they also would like to have a higher
credit limit because of the benefit you get in your credit score by having a higher credit limit
relative to your balance. And so it's very nice to have a very high credit limit
on your card
even though you never intend to use the entire amount. So the question is
well how in the world can I raise the credit limit on my card? So there's a couple of ways you can do this.
One is a shorter-term strategy, and one is a longer-term strategy.
The short term strategy is ask them to increase the credit limit.
I know that sounds very simple. And you probably didn't need me someone to tell you to do that.
You probably could have figured that out by yourself. But let me explain
what happens when you do that. Let me explain the moving parts kinda behind-the-scene.
All credit card issuers, especially the front line customer service people
have some degree of flexibility with respect to the credit limits on your card.
Meaning that if you have
a $10,000 credit limit or a $20,000 credit limit and you want a higher one,
then you can call the front line customer service people and simply ask them
"Hey can you increase my credit limit?" And most of them have the flexibility and are empowered
to increase it but only by a small amount
$500, $750, maybe a $1,000. But that's going to be about it.
Anything above that is
essentially you applying for credit, because if you're asking for a
considerable increase
in the limit, that's different than what you got when you
opened the account. So essentially they're going to have to go through the
underwriting process again
to approve you at the new higher limit and
that's going to mean that you will essentially apply. You can do it over the
phone verbally.
You're applying for a much like higher credit
and guess what's going to happen next? They're going to pull your credit report.
They're going to pull your credit score. And they're going to use that type of information to determine whether or not you have earned
that considerably higher credit limit or not.
Now, a lot of people like to avoid that scenario because of the
potential impact on the credit score when you apply for new credit with a credit card
even if it's just a credit limit increase, it can end up with an inquiry
on one of your credit reports and that can be problematic all be it
minimal. Okay. So at least be aware of that.
But I wouldn't not do it simply because of that.
So that's the short term strategy. I wouldn't expect
you to be able to turn $5,000 credit limit into a $10,000 credit limit
with that strategy,
I wouldn't. I would expect you to be able to turn a $5,000 credit limit
into a
$5,500 credit limit using that strategy. But still, you know, it's better than a stick in the eye
and it was free, and the phone call
didn't take very long, and you got a higher credit limit out of it. The longer term strategy
increasing your credit limit
is essentially, it's very organic... You're doing nothing but using the card,
paying it in full. And over time the credit card issuer will see
that you are a good customer, meaning that
you pay your bills on time. You
have never gone into default. They've never had to chase you down for payment
and
if you're using the card a lot your generating a slight
fee income or interchange income for the bank.
If you're carrying a balance from month to month that's not a good thing
because then now you're paying interest. But from the banks perspective that is a good thing because
they're earning revenue out of that.
By doing that and paying the card on time
over years, they're going to increase your credit limit
periodically simply to either reward you or entice you to use the card
more
and so it's not uncommon
for a card to be open with a $10,000 limit and then a few years later
the card all of a sudden has a $20,000 limit because of your usage patterns.
So those are a couple of strategies for increasing your credit limit; one very
short term
but minimal. And one much longer term but you're gonna get much more out of it.
so if you have any other questions pertaining to credit or financial topics
please submit them to Creditcard insider.com.
Thanks for watching and have a good day!