Feeling penned in by the low credit limits on your credit card? You might be able to boost your credit limit to a higher amount. Often, all it takes is a single call to your card provider. The bigger question, though, is whether you’re financially prepared for a higher limit.
Your credit card providers will always set a credit limit on your cards, the maximum amount you can borrow. If you have a short credit history or a low FICO credit score, your credit limits might be low ones, sometimes under $1,000. If you have a long credit history and high scores, your limit might be $10,000, $20,000, or more.
How do know if you’re ready for the financial responsibility of a higher credit limit? Here are some questions to ask yourself.
Do You Pay Your Credit Card Bill Late?
Do you pay your credit card bills by their due dates every single month? Or have you missed payments in the past? If it’s the latter, you might want to hold off on requesting a higher credit limit.
Paying your credit cards 30 days or more late will cause your FICO score to drop by 100 points or more. Your credit card provider will also charge you a penalty, and your card’s interest rate might soar. If you have a higher credit limit and a high balance, an interest rate spike could cost you quite a bit in extra interest payments.
Having a history of late payments will also give your credit card provider pause; the financial institution might not want to boost your limit if you don’t always pay your bill on time.
Do You Carry a Balance on Your Card?
The smart way to use a credit card is to pay off your balance in full each month. This way, you boost your credit score by making on-time payments, and you won’t get hit by the high interest that is often…