Raising Your Credit Card Limit

Several factors can be involved in a consumer’s decision to raise their credit limit. Regardless of the need, consumers must be aware of the process and the results raising their limit might have.

Tug-of-War

The relationship between a consumer and their credit card providers is little bit like a game of tug-of-war. There’s give and take on both sides of the competition and the idea is for both parties to stay out of the mud, if possible. Credit issuers want to increase credit limits because it brings in more income from interest fees. Conversely, consumers want increases in credit limits because it helps them make purchases which they otherwise would not be able to make. More savvy consumers also realize that a higher credit limit can reduce credit utilization which can increase your credit score. The difference is how each party feels about maintaining higher balances for an extended period of time.

What Credit Providers Want

If a customer requests an increase to conduct a balance transfer from another account, the card provider will look to see if the balance transfer amount frees up an account that has a good history. This means the consumer is consolidating debt to take advantage of interest savings or some other benefit. As stated above, if the accounts show the consumer has repaid debts and incurred debts and repaid those debts, they are more likely to grant the request because they see that their customer can service the additional amount on their credit line.

What Credit Providers Don’t Want

When a credit card company contemplates raising a credit limit, they look at the cardholder’s payment history on their account as well as on other credit accounts they hold. If the consumer maintains high balances on their other credit accounts, then the credit card issuer will be wary of granting a requested increase. Card providers like to see the balances go up and down and up and down. In other words, the cardholder doesn’t keep the balances at maximum all the time, indicating the cardholder is living on the edge of their finances. Similarly, credit providers don’t want a request for increase to accommodate a single purchase – another sign of a cardholder living on the edge.

A Good Time to Make the Call

After a consumer has read the terms and conditions of their agreement with a credit provider and determined they would like to request an increase, they have to look at the world through their credit provider’s eyes. Generally, credit issuers want to hear that the cardholder has had a positive change in their financial condition – a raise at work or an inheritance which provides greater asset value and liquidity. Also, when a consumer pays off another card account which basically frees up more of their liabilities and improves their debt to asset ratio, the credit card issuer will see that their customer can handle the increase without necessarily affecting their financial position negatively.

A Bad Time to Make the Call

Desperation is never a good ally when requesting an increase. When a consumer has used up all their available credit on their existing accounts, the credit card issuers can see it. Credit reports, though somewhat delayed in processing, generally reflect a consumer’s standing with respect to their reported debt. Credit card companies aren’t stupid; they know most consumers with credit will have “off the book” accounts with other credit sources. If a consumer has been living with their cards maxed out and making only the minimum payments on those accounts, the credit provider won’t go further into debt with the consumer. In fact, in some cases, upon request and review, the credit provider may actually reduce the consumer’s credit limit, forcing them to pay more on their monthly payment. And in some cases, the credit card company will cut off the customer’s credit entirely, due to their analysis of the customer’s credit standing.

Some Things Just Happen by Themselves

Many times, when a credit card company has been receiving the payments on an account on-time or ahead of time and in amounts greater than the minimum payment required, they will increase the credit limit automatically. The amount of the increase is up to the credit provider, but in some cases it can be substantial. Consumers should make contact with their credit card provider to determine what conditions apply to an automatic increase in the credit limit.