Personal Finance Advice

Many people argue that there is nothing constant in this world (except, of course, for death and taxes), so why should your credit limit on your credit cards stay the same all the time? The fact is that your credit limit will probably fluctuate greatly depending on how you use your card and how efficiently you pay your card on time.

If you pay well and use the card a lot, you can expect an increase eventually.  Once you prove to your credit card company that you’re a good customer they’re going to consider increasing your limit.  What is a good customer? It’s someone who not only pays monthly bills on time every time, but also who uses the card on a regular basis.  If you don’t carry a balance from month to month you may not get the same attention from your credit card company.

It may surprise you to find out that credit card companies also take your other accounts into consideration when deciding to increase your credit limit.  They may periodically run a credit report on you to see if you’re handling the rest of your finances as well as you handle your credit card, and if everything looks good then they increase your limit.

The funny thing is they don’t call you and ask if you want an increase in your credit limit; they just do it.  Sometimes they’ll send a letter in the mail to you congratulating you on your timely payments and announcing that you have earned a higher credit limit, but other times you’ll take a look at your statement and notice the increased limit and think to yourself, “Have I always had such a high credit limit?” Don’t be surprised if you experience more than one credit limit increase during the life of your card if you always manage your payments well.

If you don’t pay on time then you may find your limit decreased.  When you send payments in late, or miss them altogether, your credit card company starts to doubt your ability to pay.  Not only will you see your credit limit decreased, but you might wind up with a higher interest rate in addition to the inevitable fees associated with late payments.  You might pay your credit card on time like a champ, but if you get behind on other payments your credit card company might review your credit report and decide to decrease your limit to avoid the potential for you getting behind on payments to them.

In other words, it’s better to keep up on your payments to avoid all sorts of trouble.

Do you want an increased limit? As long as you have the ability to stay away from maxing out your credit card then an increased limit certainly can’t hurt.  After all, available balances reflect well when it comes to your credit score, and it’s always nice to have the funds available if an emergency were to arise.  Then again, if you are the type of person who enjoys impulse shopping and usually winds up maxing out credit card balances then a suddenly increased limit might be a dangerous situation.

If your credit limit gets so high to where you’re uncomfortable with having so much money available to you, contact your credit card company and ask them to decrease the limit.  Although credit card companies don’t get this request often - and they certainly don’t like to do it - they usually would rather decrease the limit instead of losing you as a customer.