In many cases, a credit limit increase can sound like a good idea. If you start out with a credit limit of $2,000, for example, it’s good to know that your limit can increase in the future so you can have more buying power and find it easier to maintain a low utilization rate.
Sometimes, increasing your credit limit will not always be in your best interest because it can tempt you to overspend. In that case, it’s also easy to drive up your utilization rate, which is how much you are spending versus how much available credit you have. If your utilization rate gets higher than 20%-30%, it can begin to hurt your credit score.
What’s worse, by overspending and not paying your credit card balance off in full each month, you can get into debt.
If you’d like to secure a credit limit increase for a credit card and you know that you’ll have a good sense of self-control over your spending, there are quite a few ways to obtain a credit limit increase.
In this article, we’ll go over your different options when it comes to obtaining a credit limit increase and what you might want as an alternative.
How to Ask for a Credit Limit Increase on Your Current Card
One of the most common ways to obtain a credit limit increase is to simply ask for one. Most credit card companies and banks allow you to request a credit limit increase online or you can do it by phone.
We’ve gone through the process of requesting a credit limit increase with various banks in detail, including Wells Fargo, Capital One, Discover, Barclaycard, American Express, and more, if you need specific instructions regarding the process.
When requesting a credit limit increase, it’s important to make sure you meet the criteria to be considered. Some banks have certain requirements and like to see your account paid off and in good standing, a good credit score, and recent spending activity on your end.
If you haven’t been consistent about paying your credit card bill on time, that may work against you when you decide to request a higher credit limit.
On the other hand, if you’ve been managing your card well and paying your bill on time and would like more buying power, you may want to consider requesting a credit limit increase just to see what the end result will be.
Sit and Wait (Automatic)
Some credit card companies will offer you a credit limit increase automatically so you won’t need to do anything on your end.
If you’ve been spending on your card regularly, paying your bill on time, and keeping your utilization rate low, you may receive an offer to increase your credit limit automatically.
In this case, you can either accept or deny the offer. In most cases, accepting the offer will be your best bet if you like the credit card and use it from time to time. Even if you don’t use the card often, having a higher limit will only help lower your utilization rate as long as your spending doesn’t increase significantly.
Consider a New Card
If you’re on the fence about getting a credit limit increase, you can always consider signing up for a new credit card instead. Adding a new credit card to your wallet can increase the number of accounts you have, which can be a positive move for your credit if you only have a low number of accounts total.
Some new credit cards also have great sign-up bonuses so you can take advantage of more cash back offers, an extended 0% APR rate, balance transfers, etc., and these are benefits you might not be able to receive if you only increase the limit on your existing credit card.
To find out if you’ll be approved for a new credit card without hurting your score, you can get pre-qualified, which typically allows banks to peek at your creditworthiness via a soft inquiry. Getting pre-qualified for a credit card can reduce your risk of getting denied, and it’s pretty simple. Find out how to do it here.
Also, another reason why you might opt to just get a new credit card instead of considering a credit limit increase is if you don’t like or use your current card often. If you have an annual fee, a high-interest rate, and little reward opportunities with your existing card, it won’t make much sense to increase your limit and buying power.
Instead, signing up for a new and better credit card can be more beneficial and help you save money, especially if it has no annual fee.
Get a Personal Loan
If you are thinking about a credit limit increase because you need the extra money but don’t want to obtain a hard credit inquiry, a personal loan is an alternative option.
There are quite a few internet-only personal loan companies that allow you to see if you are pre-approved for a loan without involving a hard credit inquiry. Personal loans also tend to have lower interest rates than credit cards, so if your main intention is to borrow money to cover an expense, this may be a better option.
To see if you qualify for a loan, use our online tool here. You just need to fill out one application, and MagnifyMoney will check your rate with multiple lenders (without harming your credit score) to help you find the best offer.
What to Do If You Get Denied
If you request a credit limit increase and get denied, you’ll usually receive a response explaining why you didn’t get approved. Once you know why you didn’t get approved, you can take the necessary steps to fix the issues outlined and request an increase again if you wish.
Be mindful that some banks will let you request a credit limit increase at any time, while others may require that you wait a few weeks or months before putting in a request again.
While waiting it out and correcting the issues that contributed to you getting denied should fix the issue, you can also try either of the alternative options mentioned above as well if you didn’t get approved for a credit limit increase the first time around.
Benefits of Requesting a Credit Limit Increase
Obtaining a credit limit increase can be a smart move and provide you with benefits like increasing your credit limit and having more buying power in the event that you need to use your card for a large expense or emergency. With a higher limit, you are less likely to max out your card.
A credit limit increase will also make it easier for you to keep your utilization rate low and preferably below 20%. The process may also be easier than applying for a brand new credit card, especially if you receive credit limit increase offers automatically.
Drawbacks of Requesting a Credit Limit Increase
Increasing your credit limit isn’t always the best option for everyone, so it’s only fair to go over some of the possible drawbacks of making this decision.
In some cases, you’ll receive an extra credit inquiry, which could be a hard credit inquiry when you request a credit limit increase. Increasing your limit can also increase the risk of overspending and getting into debt.
There’s also no guarantee that you’ll get approved for a credit limit increase, so your request can get rejected. Also, if you have a card with a high-interest rate and an annual fee, you might be better off signing up for a better credit card.
Requesting a credit limit increase can seem like a good idea on the surface, but it’s not the best solution for everyone. You must determine your needs, current situation, and intentions before going through with your decision.
If you decide to move forward with obtaining a credit card limit increase, be sure to pay your credit card balance off in full each month and keep your overall utilization rate at 20% or lower.