NEW YORK (MainStreet) – It may not be the smartest financial move you can make, but if you really do need a hike in your credit card, there are a few savvy ways to pull it off, as well as plenty of not so savvy ways. The key? Be a good customer, have your paperwork ready to go and know what card issuers like to see before they grant a limit hike.
There are about 609.8 million active credit cards in the U.S., according to the Federal Reserve Bank of Boston. But getting an increase in your debt limit can be a double-edged sword.
On the plus side, amping up your limit can give you some additional wiggle room on your spending, which can come in handy for a small business owner (a very small business owner) or for people who are disciplined about paying their credit card bills on time and who pay more than the minimum amount on their monthly bills.
Raising your credit ceiling can also moderately improve your credit score. Credit scoring agencies place a higher value on consumers who only use about a third or a half of their overall credit limit. If you bump up too closely to your credit limit – say 80% or 90% - that can drag your credit score down (creditors view that as sign that you have trouble managing your spending).
But raising your credit limit can also damage your financial health, and for obvious reasons. The more debt you pile up on your credit card, the longer it will take to pay off. The difference between having a $7,000 credit limit and a $10,000 credit limit is more than just $3,000. It also represents the interest you could pay on that $3,000 if you’re not a stickler about paying your card bill on time every month.
But if you still want to raise your credit card limit, there are some tricks of the trade that can put you on the fast path to approval. Let’s review the best moves you can make.
Have a good track record of spending within your limit. One sure way to be rejected for a card limit hike is to exceed your credit card balance – even for just one month. That sends a signal to the card carrier that you can’t control your spending. Keep your spending below your card limit and you’ve already cleared one hurdle.
Use your card regularly. It’s a good idea to plan your card limit request well in advance. During that time, use your card regularly. The reason? Credit card companies are reluctant to hand out higher credit limits to customers who use their cards only rarely. That’s a red flag for card carriers – they want customers with a track record of using the card and who pay their bills on all those transactions on a regular basis. Regular card activity shows the card company that you can handle a higher balance, along with the higher payments. But minimal users don’t have that track record.
Pay as much as you can each month. Card companies don’t like minimum payments. So if you’re a minimum payer each month, don’t bother asking for a card limit. But if you have a good track record of making higher payments, then you have a green light. This is why it’s a good reason to take six months to plan out your card limit campaign. Use that time to make high payments, keep your spending within current limits, and use your card more frequently. Do all that and you’re pretty much a lock for that higher limit.
Be a long-time customer. Your chances of getting your limit upgrade approved are stronger if you’ve been with the card carrier for a year or more. They usually need 12 months or more to evaluate whether you’re a good credit risk or not.
As with improving your credit score in general, the secret to a higher limit is not rocket science: Manage your card wisely, and know what card companies want to see before they extend you more credit. Following the above steps should get that job done – and then some.