Credit Limit Increases – Should I accept?

Your current credit card limit not only gives you a limit to spending on your card, but it also reflects how your credit card provider assesses your worthiness and the likelihood that you will spend on their card and your ability to repay the debt.

Credit card companies are constantly assessing the credit limits of their customers. If you have displayed a pattern of keeping up with regular payments with no serious defaults, then you will likely be offered a credit limit increase. These credit limits will likely continue to be offered at least annually, regardless of whether or not you can actually afford them.

So then, is it good to accept these credit limit increases?

Firstly, if you already have credit card debt and are struggling to pay off your balance, you should stay well away from any further credit limit increases.

Many credit card customers have far more available credit than they would ever need and most would be unable to pay off such a debt. Large credit card balances have become a major problem for consumers who are struggling with day to day expenses. Many will find it difficult to recover from such debt and will carry it into their retirement.

If you are not coping with your current debt and repayments, then a credit limit increase will only tempt you to get into even more debt. Your best plan is to try to clear your current debts as quickly as possible.

Secondly, having large credit card limits can affect your future financial situation.
Even credit card customers who consistently pay off their card balances each month, should think twice before accepting a credit limit increase.

All available credit limits are seen as potential debt. This means that if you are applying for a home loan or car loan, your credit card limits will be taken into account. This could affect your ability to qualify for the loan you need.

So, unless you can definitely afford it, accepting these credit limit increases is not a good idea.