Credit Card Limit - Increase or Keep Same?

[Shwa Girl]

Advise, please.

We are using our credit cards less and less.
We are switching to a cash "diet" for most things.

One credit card wrote and told us we can increase our limit.
Does this help your credit rating or hurt it?

[save_girl]

If you aren't using your credit cards, don't increase the limit. What is important is the ratio between the balance on the credit card (this could be just what you have on it at that moment, even if you pay it off every month) and the limit.
When you apply for a loan, it is beneficial to have a low limit and a good ratio between balance and limit. If you use your card a lot, you might find a conflict trying to satisfy both of these - if you don't use your card, a low limit will meet both of those objectives.

[Natalka]

Don't increase it! At least they don't do it automatically anymore - I hated when they did that!

[caroman]

I agree, don't increase your limit. In your case there is no need for it.

[operabob]

Agreed, keep it low.

If you need to make a big purchase you can always phone them and ask for a temporary increase.

[brunt]

A bit of contrarian advice here. I have in the past increased my limit when offered.

The thing is, I am about the cheapest son-of-a-gun as you will ever meet, and there is no way that an increased credit limit will make me spend more.

So if you are concerned that an increased limit may tempt you, then by all means don't do it. If not, I don't see any harm.

[ashedfc]

True, Take it while its available. (because, you might not get it when you desperately need it)
Just because you have a larger limit doesn't mean you have to use it. Always maintain zero (0) balance, whatever you use - just pay off the balance in FULL.
That's the best way of debt/credit management.

[operabob]

I prefer the lower limit in case the card is lost or stolen and I haven't had a chance to cancel it yet.

The contrarian comments are also valid.

[One]

When determining your credit score, one of the most important things is your usage ratio (besides missed payments, collections, etc). You want to keep that ratio as low as possible, preferably below 30%. So if you have a limit of 5000 and your balance at the end of the month is below 1500 that is a 30% usage ratio (using 30% of your available credit). That number is only calculated once a month when your statement is issued. They don't care if you pay it off on time (though it's Highly recommended). So if your limit is already high, it may not be necessary to increase it. However if the limit is low, now is the time to make it higher so that your ratio will go down.

Also think about the future. If one day you go on vacation you may use the credit card a lot more than you normally would. Planes, hotels, car rentals, etc. Assuming you spend 5000 on a holiday (just a random number), you would need a limit of just over 16,000 to keep your ratio in good standing, even if you intended to pay off the card in full when the bill came.

[save_girl]

Also think about the future. If one day you go on vacation you may use the credit card a lot more than you normally would. Planes, hotels, car rentals, etc. Assuming you spend 5000 on a holiday (just a random number), you would need a limit of just over 16,000 to keep your ratio in good standing, even if you intended to pay off the card in full when the bill came.

Big BUT here on this one... The ratio is only important when you are applying for more credit. So, if you don't apply for credit immediately after going on vacation, you wait until you've paid off your bill and had a normal statement cycle without any unusual purchases on it, you don't need a higher limit. You don't need to maintain a good ratio all the time, you only need it at the times you are applying for more credit.

AND, unless you are relying on your credit card for purchases, remember that the higher the limit, the less credit you will get elsewhere - so if you want a loan somewhere else, having a lower limit on your credit card is good (again, as long as your ratio is also good at the time you apply for more credit).

[Zonny]

I prefer the lower limit in case the card is lost or stolen and I haven't had a chance to cancel it yet.

The contrarian comments are also valid.

If your card is stolen, I think you're only responsible for the first $50 or something like that.

[save_girl]

If your card is stolen, I think you're only responsible for the first $50 or something like that.

You have to check the small print, but sometimes you aren't responsible for any at all (will also depend on the circumstances/type of charges), not even $50. Credit cards are safer than cash in most circumstances.

[Zonny]

In any case, for theft it probably doesn't matter if you havea $500 limit or $5,000. We'll all pay for the loss in the end, but you personally won't be held responsible for it all.

I don't have my credit card signed, just for the principal of it. IMO, 97% of retailers pay absolutely no attention to the signature. They sometimes look, pretend like they're comparing signatures (even when the back of mine is blank!) then hand it back. Very few ask for ID (and one cashier at SDM won't let me use my CC at all without it being signed, ID or no). I'll be glad when all retailers have the required chip readers so I can punch in a code.

[Shwa Girl]

Wow, I'm impressed.
Such wise SCs.
Good advice all around.

We will probably keep it low.
We do pay balances every month, when there is a balance.
We don't do large trips, but if we wanted to, we would save up the money and budget for hotel, car etc. We would take the credit card in case of an emergency.

Really, really appreciate all the good comments and different points of view expressed in this thread.

Thanks much!!!!

[kanewtz]

I wish my bank would let me raise my credit limit. However, they won't.