Credit Card: Should You Accept an Offer to Raise Credit Limit?

Credit card issuers initially grant lower credit limits to new card applicants. Higher limits are offered if the card user has a consistent, timely repayment record and increased income. However, accepting such a high credit limit offer can put you in a debt trap if you are not careful. 

Take a look at the benefits and drawbacks of higher credit limits to understand if you should accept your creditor’s offer. 

Should you accept an offer for a higher credit limit? 

An increased credit limit means you get to spend more! Sounds lucrative, right? But that’s not the only benefit you should consider when contemplating a higher credit limit.. 

If you have learned to manage your credit wisely, there are multiple upsides that you can enjoy from an increased credit limit. You can manage emergencies effectively, repair your credit score, and much more. So accepting a higher credit limit offer depends on your ability to manage your expenses. 

Benefits of higher credit limit

• Increased funds for emergencies 

It is advisable to keep an emergency fund. But life is unpredictable and emergencies occur mostly when you are not prepared for it. In such instances, credit cards come in handy. These emergencies can be medical or occasional. An increased credit limit will definitely help you in managing these situations more efficiently. 

• Repair credit score 

An increased credit limit and an improved credit score are directly proportional. You can take advantage of debt consolidation. 

It will also be easier for you to avail loans in the future. Your credit utilisation ratio will also be under 30%, considering you will have a higher limit than you usually spend. 

• Lucrative borrower profile

An increased credit score puts you in the good book of lenders. It reflects your ability to manage finances more efficiently and your creditworthiness. This will help in availing loans more easily and at lower interest rates. 

• Better than getting a new credit card 

The problem with getting a new credit card is that the length of your credit history is getting shorter. To calculate credit history length, the age of old and new accounts is taken into account along with the average age of all accounts. So instead of going through the inconvenience of getting a new credit card, just increase your current credit card limit. 

Drawbacks of higher credit limit

• Encourages spending 

If you are an impulsive buyer, then maybe this is not a good idea for you. You may end up in a debt trap if you spend more than your budget. Also, this may put a dent in your credit score. 

• Higher interest payment 

If you are unable to pay your full bill by the end of a month, you will have to pay interest. A higher credit limit may result in higher spending, hence higher interest payments. So, you have to be careful that you can pay back what you borrow. 

• Higher risk of security 

When you have a credit card with a high credit limit, the risk of loss is also heightened. If your card gets stolen or misplaced, you will be at risk of higher debt. Hence, you should be more careful with a credit card. If you find out that you have lost your card, or notice any suspicious transaction, inform your issuer immediately.

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