Today I'm going to talk about why don't make requests for credit limit increases, but first, if you are new here, we're all about how to maximize the value for credit cards. If that sounds interesting, then start our topic, but let's get started.
To start off with what I'm talking about credit limit increases
To start off with what I'm talking about credit limit increases, I'm not talking about the ones that are given to you, that you don't ask for, so if a bank wants to give me a credit limit increase and there are no hard inquiries, I'm definitely going to take it, because there's no cost to it, so there's no reason not to.
What we're talking about here is making a request to increase your credit limit by taking on a hard inquiry, a lot of people seem to be really obsessed about increasing their credit limits for whatever reason, which I don't advise, anyway, there's just not that much need to have that higher credit limit.
The reason why I personally don't ask for credit limit increases is because if I am going to take a heart inquiry I might as well get a new card and get a new sign up offer, for whatever reason you could either do the credit limit increase and take on a hard inquiry or you can apply for a new card.
If you think through the process, what are the real reasons to increase your credit limit, the first one is to have a lower utilization, so let's say you do use your card and you don't repay it, the higher of a total credit limit you have the lower your utilization every single is going to be, the other benefit is that you'll obviously have a higher ability to make purchases.
That's going to be helpful
So if you do have big purchases coming up, that's going to be helpful, if you apply for a credit card you're getting the same two benefits, so again since you are getting a new credit limit that's going to help your utilization as well as your ability to buy things, you also get the added benefit of increasing things that help your credit score.
But you're getting higher total accounts, because you're adding a new account as well as you're going to increase the average rates of your accounts in the short term, it's not really going to help in the long term, your 20s or 30s and maybe even your 40s, it's going to help to have more cards that are older.
That is going to age with you rather than not having those cards, the cost to do this is still the same, because you still have that one inquiry, and if you are worried about annual fees, you can always apply for cards that don't have your fees, and again you still get a sign up offer which gives you outside value.
For example, if you have a freedom card, if you apply for something like the freedom card unlimited, you're getting another $150 or $15000 ultimate reward points for $500 or spend that you're probably going to do, anyway, we've talked a lot about why people ask for more credit, and the funny thing is I actually do the opposite.
I intentionally decrease my credit limits
So I intentionally decrease my credit limits when I apply for new cards at a certain point, you're going to have enough credit cards, which probably means that you have a relatively high credit limit, that doesn't make sense to keep asking for more, most things have a certain credit limit, that they will give you up to based off your income.
For example, if you make 100k, some banks might give you up to $50,000 as a total credit limit among all of your cards for that specific issuer, once you hit that limit, if you apply for a new card they might either automatically allocate some of the credit limits from one of your old cards to that new card, or is they're going to ask you whether you're comfortably reallocating something.
Just because if you don't they can't go into any more credit, because they're already at your max, this is why for many issuers actually decrease my credit limits, because it doesn't make sense for me to keep pushing up on the upper balance what I don't really need to, it's nice to say that you have a credit limit of a hundred thousand dollars, but I personally just don't see myself using it, so yes, having it is nice, a nice bragging thing.
But it doesn't really solve any real pain points for me and doesn't really add any value, if anything having such a high credit limit is actually detrimental, so again I don't want to have to call in every time and to move my credit around, just to get a new credit card for most issuers, you can decrease your credit limit either online or by calling them.
Let's say I apply for a new Chase card
Let's say I apply for a new Chase card, I typically get about $20,000 as a credit limit, and then I immediately reduce that to about $5,000, there's nothing I buy, that requires that high of a credit, so it just doesn't make sense and again I'm not keeping a balance on my credit cards, because I don't really want to pay interest, so having that high balance isn't really useful unless you're using the whole thing in a single month.
For example, a card like the American Express Platinum Card requires her to pay off the card in full every single month, so you're not allowed to keep a balance typically, so there are sometimes promotions, where they'll be like you've been targeted to keep a balance and you're paying only 2%, but that's not to everyone, the default for charge cards is that you pay off the card in full every single month, if they aren't collecting interest and soft transaction fees, making money off transaction fees is also lower risk, just because again you're supposed to pay off your card in full every single month.
If you do look in the news, there are a lot of celebrities who have been sued for not paying off their cards, the only situation where I think it might make sense to get a credit limit increase is if it's your first card may be and for whatever reason you don't want to apply for a second card, but even then I still think it makes more sense to get that second card, so I hope that was helpful and let me know if you guys have any questions.
My question for you is do you make credit limit increases
My question for you is do you make credit limit increases, let me know in the comments, it really helps us out and if you know anyone else who benefits from what we just talked about, feel free to share this with them because it's probably going to help them out.