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What are the pros and cons of increasing your credit card limit?!

When you receive a credit card you’re given a credit limit which is the maximum amount of money you can borrow. In general, credit card limits can increase over time, depending on your credit score, income, and other factors. Creditors make these decisions at their discretion, and they might give your limit a boost after a review of your account. However, as a cardholder you can also request an increase – but should you?!

Pros of increasing credit card limit

1. More flexibility: Increasing your credit card limit gives you more flexibility with purchases. With a higher limit, you don’t have to worry about maxing out your credit card or being denied for purchases that exceed your current limit.
2. Improved credit utilization ratio: Credit utilization ratio is the amount of credit you’re using compared to the total credit limit available. A lower credit utilization ratio is considered better for your credit score. Therefore, increasing your limit can help lower your ratio and thus improve your score.
3. Access to more rewards: Many credit cards offer rewards programs, such as cashback, points, or miles based on the amount you spend. Increasing your credit card limit means you’re able to use your card for bigger purchases, which can give you access to more rewards (pay off your balance in full each month, though). 
4. Better credit history: Building a positive credit history is essential for securing loans and credit in the future. Increasing your credit limit and consistently making on-time payments can build a positive credit history.

Cons of increasing credit card limit

1. Temptation to overspend: A higher credit limit might also increase the temptation to spend more than you can afford. Remember, increasing your limit doesn’t increase your income. And if you can’t pay off your balances in full each month, you’ll end up paying interest. 
2. Risk of debt: Likewise, increasing your limit puts you at risk of long-term credit card debt, which can be challenging to pay off, especially if you’re only making minimum payments.
3. Temporary credit score dip: When you request an increase in credit limit, your lender will likely conduct a hard inquiry on your credit report. A hard inquiry can temporarily lower your credit score by a few points.

Increasing your credit card limit can have a positive or negative effect on your finances. It’s essential to weigh the pros and cons before requesting an increase, and make sure you’re able to manage borrowed money responsibly.