Guide to changing the credit limit on your credit card
Every credit card has a minimum and maximum credit limit. These limits determine how much you’re allowed to borrow in one go. What you may not realise is you can increase or decrease your credit limit depending on your needs. Our guide to credit limits will show you how.
What is Your Credit Limit?
When you first get your credit card your lender will give you an agreed credit limit. This will usually be determined by your credit record and history with the lender. Those with better credit records will be offered a higher limit because lenders see them as less of a risk.
Once your credit limit is set you’re free to spend. As long as you stay below your limit you won’t have any problems. If however you try to spend above your limit one of two things will happen…
- The transaction will be refused. This will cause you considerable embarrassment if it happens in public.
- The transaction will go through, but you’ll be charged by your card company for exceeding your agreed credit limit.
You want to avoid either scenario at all costs!
You Can Change It
What many card users don’t know is you can change your credit limit whenever you want. But why would you want to change your limit?
If your credit limit is quite high you may be tempted to spend more than you can afford. This is the perfect time to contact your card company and get them to reduce your limit. You’ll have less temptation to deal with, and you won’t get yourself into debt.
There may be times where you’d like to increase your limit. Perhaps you’re going on holiday, or Christmas is coming and you could do with more “spending power”. Again, contact your card company and ask them to adjust your limit.
Increasing your limit isn’t as easy as reducing it as your lender needs to consider your credit history. By increasing your limit you become a greater risk, so they want to make sure your finances are in good shape.
Something to Watch Out For
The rules are set to change, but in recent years credit card companies would gradually increase your credit limit without telling you. These increases would be minimal, but would entice you to spend more money.
This underhand tactic has been blamed for getting customers into debt, and has been outlawed. Whilst in theory it shouldn’t happen anymore, it’s worth keeping your eye on your limit to make sure it hasn’t been changed without you noticing.
Don’t Feel Obliged To Spend
Just because you have a high credit limit don’t feel obliged to spend too much money. You should aim to only borrow what you can fully repay within a couple of months, no matter how high your limit.
That way you’ll always have a minimal balance and less to pay in interest!